Personal Finance

Struggling With Your 2.5% Social Security COLA? 3 Ways to Generate More Retirement Income This Year

Maurie Backman

Published: February 10, 2025 6:28 am

Each year, Social Security benefits are eligible for a cost-of-living adjustment (COLA). The purpose of COLAs is to make sure that benefits are able to keep up with inflation. But unfortunately, they often fall short.

If you’re having a hard time making ends meet based on your 2.5% Social Security COLA this year, that’s understandable. Not only is it the smallest COLA to arrive in years, but it’s also already trailing behind recent inflation.

But if that’s the case, don’t just resign yourself to being cash-strapped for the duration of 2025. And don’t force yourself to resort to drastic measures like skipping medication doses or meals just to get by. Instead, look at these options for boosting your retirement income at a time when your Social Security benefits just aren’t cutting it.

1. Go back to work

If you’ve been hesitant to get a part-time job out of fear that it’ll result in your Social Security benefits being taken away, here’s some good news. Social Security recipients are allowed to earn money while receiving benefits. And once you reach full retirement age (FRA), you can earn any amount of income without risking having benefits withheld.

If you haven’t reached FRA and are receiving Social Security, you’ll be subject to an earnings-test limit before your wages from a job negatively affect your benefits. But that limit is pretty high — it’s $23,400, or $62,160 if you’ll be reaching FRA later this year. Even the lower number here gives you plenty of leeway to boost your overall income.

And if the idea of having to work on a preset schedule isn’t appealing to you, know that you could always join the gig economy instead. This allows you to work when it’s convenient. And it may be your ticket to finding a job you actually enjoy.

2. Rent out part of your home

If you own your home and have an extra room, renting it out is a good way to generate income. And if you don’t have a room to spare, you might still be able to rent out portions of your home strategically.

Some people, for example, rent out their swimming pools by the hour. Others rent out parking in their driveways in areas where spots are hard to find. Think strategically about the ways you can turn your home into an income source if you have a need for extra money.

3. Rethink how you have your savings invested

If you’re struggling financially with your 2025 Social Security COLA, it means you probably don’t have much savings to fall back on. But even if you only have a little bit of savings, you can turn that money into more of an income source by investing in the right assets.

One good option is municipal bonds. They tend to be fairly stable, and the interest they pay is federally tax-exempt. CDs and dividend stocks could also be good choices for your savings.

Talk to a financial advisor if you want help setting yourself up with investments. Even if your nest egg is modest, you may be surprised at how much ongoing income it can provide you with if you choose the right assets.