Personal Finance

Is Your Social Security COLA Falling Short? Here's What to Do

Maurie Backman

Published: January 17, 2025 9:58 am

Last Updated: January 17, 2025 9:59 am

In recent years, Social Security’s cost-of-living adjustments, or COLAs, have come in on the bigger side. But in 2025, seniors are only seeing their monthly benefits increase by 2.5%. Not only is that not a particularly large boost, but it’s also already falling behind inflation.

In December, the Consumer Price Index, which measures changes in the cost of consumer goods and services, rose 2.9% on an annual basis. If annual inflation holds steady in the upper 2% or low 3% range this year, it means seniors on Social Security will lose out on buying power.

Unfortunately, the problem with COLAs is that they’re based on previous inflation. But they’re not predictive. So if you’re already finding that your 2.5% COLA isn’t helping you keep up with your expenses, here are a few moves worth making.

1. Rethink your budget

If you’re retired, it’s natural to want to spend money on things other than just basic expenses. But if your Social Security COLA isn’t keeping up, you may need to make cutbacks.

Take a look at your non-essential spending and see where there may be room to make changes. That could mean canceling cable or doing less dining outside the home.

2. Downsize

If you’re sitting on a larger home, it may be costing you a fair amount of money — even if your mortgage is already paid off. Downsizing could result in lower costs for everything from property taxes to insurance to maintenance to utility bills.

But that’s not all. If you own your home outright and have a fair amount of equity in it, you may be able to downsize, buy a smaller home in cash, and have some money left over. That’s money you can use to supplement your Social Security benefits and be more comfortable on a whole.

3. Relocate

If you live in a high or even moderate cost of living area, it may be time to consider a move. Social Security is going to pay you the same monthly benefit regardless of where you live. If you’re able to relocate to a part of the country where living costs are cheaper on a whole, it should help you stretch your benefits more.

That said, relocating in retirement isn’t easy — especially if it means not having family in town or having to find a new social network. You’ll need to weigh the financial benefits against the emotional upheaval relocating might cause.

4. Go back to work

You don’t necessarily need to un-retire if you’re struggling to cover your living costs on Social Security. But what it does pay to do is look at part-time work.

Thanks to the gig economy, a part-time job might even be something you enjoy. You could sell baked goods at farmers markets, watch other people’s pets, or even drive for a rideshare service if that’s something you feel comfortable doing.

You could also look at part-time work in your former field. If you used to be a teacher, you could sign up to substitute. If you’re a former marketer, you could take on the occasional consulting job for extra income.

Given that this year’s Social Security COLA wasn’t particularly robust, it stands to reason that some seniors may already be feeling squeezed financially. But that’s a situation it pays to get ahead of sooner rather than later.