The Social Security Administration recently released its December 2024 Monthly Statistical Snapshot, which shows the effect of the 2.5% cost-of-living adjustment (COLA). This adjustment aims to help seniors and other Social Security recipients keep up with inflation. On average, Social Security retirement benefits increased by nearly $50 per month or about $600 annually.
However, some question whether the 2.5% COLA is enough to keep up with the costs that disproportionately affect seniors, such as healthcare and housing. A recent report by the Congressional Research Service indicated that if the CPI-E, which considers these factors, had been used instead of the CPI-W, the COLA for 2025 would have been 3% rather than 2.5%. Several legislative efforts are underway to replace the CPI-W with the CPI-E in the COLA formula, potentially impacting future Social Security reforms.
If you plan to retire on Social Security alone this year, you may be setting yourself up for some tough times.
Retirees question cola adequacy
The average retired worker on Social Security today collects $1,976 a month, slightly less than $24,000 annually.
The Bureau of Labor Statistics says that as of 2022, the average annual expenditures for Americans 65 and those who make over $57,818 means that the average Social Security benefit wouldn’t cover half of the typical senior’s costs. To ensure a wealthy retirement, consider delaying your retirement date if possible, saving more during that extra time, and delaying your Social Security claim. If you own a home, you could downsize or rent out a portion of your property to generate additional income.
Working part-time in retirement is another option to supplement your Social Security benefits. A survey of 2,000 retirees found that 54% of respondents said the 2.5% COLA for 2025 wasn’t enough. To minimize your reliance on Social Security, create a personalized budget and stick to it, invest regularly, and own a diversified portfolio of high-quality, long-term investments.
By taking control of your financial future through budgeting, investing steadily, and building a diversified portfolio, you can prepare for a comfortable life in retirement, even if Social Security benefits alone may not be sufficient.
