The 2025 Social Security Cost of Living Adjustment (COLA) is expected to be lower than previous years, which could be challenging for seniors facing rising costs of basic services like food. The Senior Citizen League estimates a 2.6% COLA adjustment for 2025, down from 3.2% in 2024 and 8.7% in 2023. This lower adjustment is attributed to slowing inflation, but current inflation rates still exceed 3%, meaning the COLA may not keep pace. Many seniors are already struggling, with 53% dipping into emergency savings and 43% facing increased household expenses. To mitigate these challenges, it’s advised that seniors plan for diversified income sources, such as investment portfolios, part-time jobs, or rental properties, to ensure financial stability, especially considering potential Social Security funding issues beyond 2035.

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The 2025 Social Security Cost of Living Adjustment, or COLA, is expected to be lower than previous years, which, you know, that could be really challenging for seniors, especially with, you know, price increases and basic services like food and, you know, tight budgets.

So my question is, what’s going on that COLA isn’t living up to expectations? You know, a lot of retirees might have for it.

Yeah, Eric, you said it perfectly well. This is really serious for seniors and especially with inflation running wild and services and food prices increasing.

It’s really been difficult to get the COLA adjustments to match those price hikes accurately.

But it’s extremely important because Social Security is not an incredibly generous program for recipients that receive it.

For many people, they’re still very much on the edge of poverty.

So let’s look at some numbers here. The Senior Citizen League estimated that for 2025, the COLA adjustment is only going to be 2.6%.

Now for context, in 2024, it was 3.2, quite a bit more. And in 2023, it was 8.7, which I’m not sure if that was a record, but it was really outstanding at the time, given the high inflation that we saw.

So the slowing COLA adjustment that they are forecasting at 2.6% is attributed to slowing inflation.

But if we look at where inflation is, we are still seeing inflation reports well north of 3%, 3.5, 3.4%, the last few prints.

So it appears to be persistent. It appears to be really sticky. And it’s like it’s not going to get down to that 2.6 number anytime soon.

So if that 2.6 COLA adjustment holds and inflation continues to hold at or above 3%, frankly, seniors are just losing out, right? They’re not keeping pace with inflation. And there’s not a lot of margin there for seniors to absorb that.

That same group did a 2024 survey that revealed that 53% of seniors had to dip into their emergency savings.

And 43% said that household expenses are increasing by more than $185 a month for them.

And that’s what COLA is trying to account for. 61% of them said that food is their expense that has the greatest increase, which is not something that you can easily cut.

So these COLA adjustments really do need to keep pace with inflation for seniors just to get by.

And every year that it falls further behind just makes seniors’ lives in retirement that much more difficult.

So more than ever today, we’re advising seniors to plan for diversified income.

With some reports saying that Social Security won’t be sufficiently funded in 2035, which is something you and I have also talked about, retirees today really need to consider additional augmenting income in retirement.

That could look like building an investment portfolio today, ideally stacking up with some dividend stocks, which that extra income can really make a major difference in retirement.

If they’re physically or mentally capable, consider working a part-time job, and if possible, trying something else, maybe like a rental property or other ways to generate income.

But the bottom line here is that with the uncertainty of COLA possibly not keeping up with inflation, Social Security itself possibly not being completely funded in 2035, seniors today really need to plan to augment Social Security today and have a little bit of extra income in case those other programs don’t keep up.

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