The 2025 COLA from Social Security is bad news no matter how you look at it

We’re slowly but surely getting closer to finding out what the 2025 cost of living adjustment (COLA) will be. Although that information won’t become available until October, annual COLAs are based on third quarter inflation data. And very soon we should at least have data for July that will make it easier to estimate next year’s Social Security increase.

Unfortunately, however, the 2025 Social Security COLA is shaping up to be a bad news situation no matter how you look at it. And seniors can unfortunately be put under financial stress in any scenario that arises.

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It’s a lose-lose situation

Initial estimates call for a Social Security COLA in 2025 of 2.63%. That’s less than the 3.2% COLA seniors received in early 2024.

Of course, that number could change quite a bit depending on how inflation looks in the coming months. But whether that number moves up or down, it’s bad news for seniors regardless.

A 2025 Social Security COLA that is less than 2.63% will mean just that — a stingy raise that gives seniors limited options. But a higher COLA 2025 isn’t necessarily something to celebrate, either.

If next year’s COLA is higher than the current estimate of 2.63%, it will mean that inflation rose in the third quarter of the year. And rising inflation is not good for seniors on limited incomes. In fact, an increase in inflation could be even more harmful to Social Security recipients than a lower COLA.

It’s best not to have to rely on COLA in the first place

It is unfortunate that many seniors are in a position where they are dependent on annual Social Security COLAs to stay afloat. But if you are not yet retired, you have the opportunity to avoid this situation by coming up with external savings.

To be clear, you don’t necessarily need a million dollar nest egg. And most retirees don’t live anywhere near.

The average retirement savings balance among Americans ages 65 to 74 is $200,000, according to the Federal Reserve. Such a pillow probably won’t put you on vacation at a luxury resort twice a year. But this TO make it so you can do things like pay your electric bill, buy eggs, and put gas in your car without stress.

That said, current retirees who depend heavily on Social Security aren’t necessarily doomed. If you are healthy enough to work part-time, do it. Not only is it a great way to stay busy, but the extra income can give you more breathing room and make sure that a lower COLA or an increase in inflation doesn’t hurt your finances.

Plus, thanks to the gig economy, part-time work in retirement no longer has to mean sitting at a desk or working a cash register at a supermarket. You can pursue something creative, be it art, music or crafts. You could even transfer passengers in the car if you’re someone who doesn’t mind driving and likes to chat.

Unfortunately, seniors are in for some bad news in the context of the 2025 Social Security COLA, one way or another. Taking steps to secure external income is the best way to deal with this scenario and avoid it becoming a major source of financial aggravation.