Trending searches: 2025 social security cola increase
hi all welcome back to the channel lately every week a new Global event disrupts the economy leaving many retirees uncertain about their financial standing not just for today but for the next one two or even 5 years however one aspect of retirement that can be clarified is social securi cost of living adjustments also known as Cola in today's video we'll explore the latest expert predictions to determine whether the situation is better or worse than expected and helping retirees create Secure Retirement plans you should always ensure that your retirement strategy remains robust regardless of cola fluctuations for many however the Social Security cost of living adjustment plays a crucial role in retirement success in this video we'll clarify whether you should be concerned and offer some tips to mitigate the impact of lower than expected Cola before we move forward please click the like button if you find this video helpful and subscribe to this channel to stay in informed about essential updates with that said let's just jump into the video the 2025 Cola adjustment is estimated to be between 2.6% and 2.7% we won't have the final figure until October 2024 as the calculation is based on the first nine months of the year and will take effect in January 2025 interestingly enough this year marks the first time in over 30 years that we've seen four consecutive years with a cola of at least 2.6% or more the last occurrence of this was in the early 1990s Cola is vital for most Americans retirement sustainability because it's one of the few assets that can rise with inflation however its history is mixed before 1975 Cola adjustments were erratic and unpredictable between 1940 and 1970 Congress approved only 11 Cola adjustments in 1975 they decided to tie the cola decision to the Consumer Price Index for Urban wage earners and clerical workers CPW while this was an improvement it may not have been the best choice as CPW measures the needs of working adults whereas Social Security recipients are usually retired working adults spend on things like education clothing and cars while seniors tend to spend more on shelter and Medical Care the costs of shelter and Medical Services have surged well beyond other categories even using a more generous index like CPI instead of CPI w would Grant seniors a larger Cola but it still wouldn't fully cover inflation so how does the 2025 Cola compared to previous years over the past 15 years Cola adjustments have been minimal with 10 out of the last 15 years seeing adjustments of 2% or lower there was no Cola at all in 2010 2011 2016 and 2017 meaning no increase in benefits however this changed dramatically in recent years with a 5.9% increase in 2022 88.7% in 2023 and 3.2% in 2024 each reflecting a significant boost in benefits so what is a 2.6% increase mean for the average person it translates to about $50 more per month in their social security check assuming Medicare Part B and D premiums don't rise which is still uncertain for married couples this would be around an extra $1,200 a year most people feel that even these larger increases in recent years are insufficient there are people who were retired for years and barely raised their income because they didn't notice inflation but now everyone is playing catchup and taking the inflation increases their plans allow because they're feeling the pinch of Higher Living costs in 2022 when Social Security increased Cola by 8.7% it was a clear sign of how tough things had become in my op opinion cost of living adjustments don't match real inflation but any stable income increase is welcome in our retirement plans while social securi Cola might not be as favorable as we'd like it's better than many think let me share a Bittersweet example to illustrate how Cola even when it falls short helps retirees imagine Josh whose spending needs are $50,000 a year which Social Security miraculously matches this is a hypothetical scenario but it helps make the point Josh feels secure knowing Social Security will give a cola adjustment each year to keep up with inflation if we assume a long-term Cola increase of 2% annually but real inflation requires 3.2% more each year Josh's retirement becomes less enjoyable over time after 10 years his Social Security pays $59,750 per year but his real lifestyle costs $63,800 this means Jim feels like he's spending about $500 less per month just 10 years into retirement by year 20 his social security income is $72,800 but his real lifestyle requires $97,300 a gap of $9,975 per month while we're grateful Jim's income grows at all his quality of life diminishes each year most people don't have 100% of their needs met by social security so imagine if only 50% of your retirement needs are covered by Social Security what are you doing to keep up with inflation for the other half this example teaches us two things we need to think about the long term and without an effective inflation plan we'll feel like we're spending less and less overtime I've used a simplified scenario here but if you want to understand your own situation better feel free to book a call with us it's no cost just click the link in the video description so what can retirees do when Cola adjustments fall short first ensure you have a sound income plan that includes reasonable assumptions like a conservative Cola and inflation rate make sure your other Investments can cover any gaps so that you don't feel forced to reduce spending over time if you're proactive these lower than expected Cola announcements won't be as concerning good financial planners anticipate and minimize potential surprises and disappointments even if they can't eliminate them entirely other strategies people use include reducing unnecessary expenses taking on part-time work or delaying Social Security benefits reducing unnecessary expenses is straightforward but part-time work is becoming increasingly popular and has evolved over time instead of taking on roles like cashiering or mundane administrative tasks thanks to the gig economy retirees can now engage in enjoyable activities like selling baked goods walking dogs teaching piano or tutoring for example working 6 hours a month at $20 an hour not only provides extra income but also offers a sense of contribution it's a great way to stay active and socially engaged part-time work can also help you delay claiming Social Security benefits which despite the complaints about Cola can greatly benefit your plan in the long run after watching this video you'll know exactly what to do to mitigate the impact of lower than expected Cola adjustments however there are many Social Security tax and income details I can't cover in a brief video there are professionals out there if you want a professional team to review your specific situation and help you design a plan for a stress-free retirement I'll see you in the next video lastly before you go please click the like button for this video and don't forget to subscribe to stay informed with essential updates