Next year’s raise in Social Security benefits may not be overly generous, but it does not necessarily spell financial trouble for recipients.
Following months of anticipation regarding the 2025 Social Security cost-of-living adjustment (COLA), it has been announced that benefits will increase by 2.5% in the coming year. While this is not the smallest raise in history—there have been occasions when the COLA was 0%—some seniors might find the 2.5% increase disappointing compared to adjustments in recent years.
For those already finding it difficult to manage their expenses with current benefits, a 2.5% increase may not significantly alleviate their financial situation by January. However, there are strategies available to mitigate financial stress despite the modest COLA.
1. Re-enter the Workforce
Seniors who are unable to cover living expenses with Social Security benefits and lack substantial savings might consider returning to work. This does not necessitate abandoning retirement for full-time employment; rather, a part-time job could enhance their income. Notably, if a person has reached full retirement age, additional income from employment will not negatively affect Social Security benefits. Those below full retirement age will be subject to the earnings-test limit. In 2025, earning up to $23,400 will not impact benefits, but earnings beyond this will result in some benefits being withheld. A higher earnings-test limit of $62,160 applies to those reaching full retirement age in 2025.
2. Consider Relocation
Exploring less expensive living arrangements, such as downsizing or moving, could reduce housing costs significantly. It’s advisable for individuals to assess local housing prices if they wish to remain near family and friends. Downscaling can decrease monthly housing expenses by 10% to 15%. Alternatively, relocating to a more affordable area can be an option, though it’s important to ensure that essential services, including healthcare and Medicare options, are readily accessible in the new location.
3. Seek Family Support
It’s important for seniors to understand that seeking support from family is perfectly acceptable if they are struggling financially. If working or relocating is not feasible, involving family in financial planning can make a difference. For instance, moving in with a relative temporarily could allow for significant savings. Additionally, family members can assist with household tasks, potentially reducing paid maintenance expenses. Those needing assistance should feel comfortable asking for support, especially if they have offered help to family in the past.
Although the 2025 Social Security COLA of 2.5% is not as high as many seniors anticipated, adopting a strategic approach can help make the most of the increase.
