Hate the idea of ​​worrying about a Social Security COLA in 2025? Here’s what to do.

How much will Social Security benefits increase in the new year? This is an important question on many people’s minds as we get closer to an official cost of living adjustment (COLA) for 2025.

The purpose of the Social Security COLA is to help ensure that beneficiaries do not lose purchasing power as inflation increases the cost of living. At the beginning of 2024, social security benefits increased by 3.2%. But based on what we know so far, it looks like the 2025 Social Security COLA will be a bit stingier.

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Initial estimates call for a COLA of 2.5% in 2025. And that number has the potential to change downward if September’s inflation reading (not available as of this writing) is cooler than expected.

If you’re worried that a lower Social Security COLA in the new year will hurt your finances, it’s understandable. But it also means it may be time for a serious change in how you approach your retirement finances.

You don’t want to rely on your Social Security COLA

Social Security COLAs have long failed to help beneficiaries actually keep pace with inflation. So being in a position where you are dependent on a generous one is not a good thing at all. And if that’s the situation you’ve landed in, it might be time to make some big changes.

These won’t necessarily be easy changes, though. And that can be hard to wrap your head around. But if you’re living paycheck to paycheck in retirement and your only source of income is Social Security, then making difficult changes could ease some of your financial stress down the road.

The first thing to do is assess your expenses and see where there is room to cut. And the answer may not be obvious. But if you dig deeper, you may realize that you can actually downsize to a smaller home — one that’s less expensive to maintain and pay property taxes. And if you rent, you may find that you can lose some square footage so you can write your landlord a smaller check each month.

You can also think about where you live. Social Security will pay you the same amount of money regardless of your city or state of residence. And while some states do Social Security tax, there are often exemptions for lower earners — a category you’ll likely fall into if those benefits are your only source of income. If you live in an area with a high or even moderate cost of living, moving to a place with a lower cost of living can help stretch your benefits further.

Finally, be honest about your ability to work in a given capacity. Some seniors have health problems that prevent them from engaging in a job. Unless it’s you, though, and you just don’t i want to work, ask yourself: would you rather invest a few hours a week in a job or resort to having to skimp on meals and skip medication doses due to lack of funds?

Also remember that working today doesn’t have to mean accepting shifts at a local store or doing administrative work at an office. The gig economy is full of opportunities to generate income at your own pace. You can sell baked goods at local farmers markets, offer the occasional babysitting service, or even drive paying passengers around town in your car.

A harmful cycle that deserves to be broken

On October 10, the Social Security Administration will announce an official COLA for 2025. But if that number makes a huge difference in your finances, that’s a problem. And so, regardless of what next year’s COLA means, it’s wise to consider the changes above if you’re tired of worrying about money day in and day out.