Social Security’s 2025 COLA Forecast Just Improved. Here’s the Latest Estimate

Social Security’s 2025 COLA Forecast Just Improved. Here’s the Latest Estimate

October is always an important month for seniors receiving Social Security. The reason? This is the month when the Social Security Administration announces what cost of living adjustment, or COLA, beneficiaries will be entitled to in the coming year.

In 2023, seniors benefiting from Social Security will receive a considerable sum 8.7% Cola — the biggest to happen in decades. But this year’s COLA was a relative disappointment at just 3.2%.

Social Security’s 2025 COLA Forecast Just Improved. Here’s the Latest Estimate

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Since inflation has been frustratingly persistent, many Social Security Now, beneficiaries are eager to know how much their monthly benefits will increase in 2025. And based on recent inflation data, a new estimate is available. But maybe that’s not a number worth talking about.

A slight improvement on previous figures

Earlier this year, the nonpartisan Senior Citizens League projected a COLA of 1.75% for 2025. The group later increased that figure to 2.6%.

In mid-May, following new inflation data, the Senior Citizens League slightly increased its estimate of the Social Security COLA for 2025 to 2.66%. This is an improvement from 1.75%, but can be interpreted as a disappointment in light of more recent COLAs.

Of course, this 2.66% figure is just an estimate, and we won’t have an official number until third-quarter inflation data is available (which is why the COLA announcements always take place in October). Still, it can be helpful to have an estimate for financial planning purposes, especially if you are someone who receives most of your retirement income from Social Security.

It’s better not to bank on a generous Social Security COLA

Regardless of the 2025 Social Security COLA amount, it’s best to put yourself in a position where you don’t rely on it as much. Of course, if you’re already retired and most of your income comes from Social Security, that’s easier said than done.

But one thing you can consider in this situation is joining the gig economy to generate additional income. If you can earn an extra $100 a week, whether working shifts at a local farmers’ market or driving passengers around town in your car, you may not have to worry as much about l the Social Security increase you receive.

In the meantime, if you’re still working, one of the best things you can do for retirement is build up savings so you don’t rely too heavily on Social Security initially. If you put yourself in a position where you can earn as much or more from your savings than Social Security pays you, then it doesn’t matter whether your COLA in a given year is 2.74% versus 2. 93% versus 3.14%. .

Another thing to keep in mind is that even when Social Security COLAs are stronger, they don’t necessarily help beneficiaries maintain their purchasing power. A Motley Fool survey conducted in late 2022, following the announcement of an 8.7% COLA for 2023, found that more than 50% of respondents were unhappy with their increase because they felt that it was not enough to help them cover their expenses.

All told, it will be some time before an official Social Security COLA is announced. For now, you can keep an eye on the 2025 estimates to know what to expect. But also take steps to improve your retirement income situation, because even that 2.66% projection could potentially decline by October.

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Social Security’s 2025 COLA forecast just got better. Here is the latest estimate was originally published by The Motley Fool

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