For nearly 70 million Americans receiving Social Security benefits, the countdown to the next Cost-of-living Adjustment (COLA) is on. The Social Security Administration (SSA) will announce the annual COLA for 2025 on October 10.
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The annual COLA is critical for helping benefits keep up with inflation. While we await the official announcement, experts at The Senior Citizens League (TSCL) have predicted that the COLA increase could be around 2.5% for 2025. This is significantly lower than the 8.7% adjustment beneficiaries received in 2023 due to record-high inflation in 2022. In 2024, the increase was 3.2%. A 2.5% increase would provide around $48 more per month for retirees, bumping the average Social Security check from $1,907 to $1,955.
According to Newsweek, other experts, like Burt Williamson, a retirement specialist at PlanPrep, have predicted a higher increase of 3%.
The SSA states that the COLA’s purpose is to ensure that inflation does not erode the purchasing power of Social Security and Supplemental Security Income (SSI) benefits. The adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and reflects the price changes for goods and services consumed by Americans.
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As the cost of goods rises, these adjustments are meant to support beneficiaries and help them maintain financial stability.
So, what should retirees do to prepare for the COLA?
First, it's important to review your budget. As the COLA announcement approaches, assessing your budget can help you determine the impact of the anticipated increase and how it will affect you financially.
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Staying informed is also crucial. Watch for news updates and pay attention to the COLA announcement so that you can make informed decisions regarding your finances. Many news outlets will report the increase when it's announced, but you can check the SSA's website directly for the COLA on October 10.
Monitor your other benefits because your COLA increase and overall finances may change depending on how these look. For example, Medicare Part B premiums, deducted from Social Security benefits, could offset your COLA gain.
Those who receive VA benefits may also see some changes. Congress recently passed a new law tying veterans' benefits to the Social Security COLA, ensuring that veterans receive the same inflation adjustments as Social Security benefits.
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Consider long-term financial planning. Even with the COLA, Social Security income – at least from the average monthly check – is not enough to cover the cost of living in most places in the U.S. Take the time to think about how the COLA will impact your finances, but also consider other ways to boost your income if you don't already have them.
The COLA announcement is just around the corner, and with the modest anticipated increase, inflation is still a concern for many people. Remember that Social Security is just one aspect of your finances, and it's important to have a more comprehensive approach to retirement planning.
If you're concerned about the outlook of your finances, consider talking to a financial advisor to walk you through some strategies that give you peace of mind for your future.
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