Every October, the Social Security Administration (SSA) announces the Cost-of-Living Adjustment (COLA) for the next year. This adjustment is meant to keep Social Security benefits in line with inflation, ensuring that retirees and other beneficiaries can maintain their purchasing power despite rising prices.
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How the 2025 COLA will be set?
The SSA uses the Consumer Price Index (CPI) to decide the COLA. They compare the CPI from the third quarter of one year to the same period the previous year. If prices have gone up, COLA increases, if they’ve stayed stable or dropped, the adjustment is smaller. For 2025, experts are guessing the COLA might be around 2.57%, based on current inflation data.
Recent Changes in COLA
Here’s a quick look at how COLA has changed recently,
- 2024: 3.2%
- 2023: 8.7%
- 2022: 5.9%
In 2023, the COLA was the highest it had been since 1981, a big jump from previous years. For example, if you had a $1,000 benefit in 2021, it grew to $1,188 by 2024 due to these adjustments.
Inflation and the CPI
The Consumer Price Index (CPI) tracks how prices for goods and services change over time. As of July 2024, the CPI showed a 2.9% increase over the past year, a much slower rise compared to 2022’s high inflation rates. This suggests that inflation might be cooling down, which could lead to smaller COLA increases in the future.
How to Get More Out of Social Security Benefits?
Even with COLA increases, some retirees might still need extra income. Here are a few ways to boost your earnings,
- Part-Time Work: A part-time job can provide additional income. Many options, especially remote ones, offer flexibility.
- Supplemental Income: Consider retirement accounts like 401(k)s, IRAs, or pensions to supplement your Social Security benefits.
How to get ready for COLA changes?
To stay ahead, monitor updates from the SSA and keep an eye on inflation trends. Being informed helps you understand how changes might affect your benefits and plan your finances accordingly.
By staying informed and exploring ways to boost your income, you can better manage your finances and make the most of your Social Security benefits.
FAQs
What is the COLA increase for 2025?
Experts estimate it might be around 2.57%.
How is the COLA amount decided?
It’s based on changes in the Consumer Price Index (CPI) from the third quarter of the previous year.
When will we know the official COLA amount for 2025?
The Social Security Administration will announce it in October 2024.
Why might the COLA for 2025 be lower than in recent years?
Inflation has been milder recently compared to previous years.
How can I prepare for changes in my Social Security benefits?
Stay informed through official SSA updates and consider adjusting your budget for potential changes.
Can I earn more money while receiving Social Security benefits?
Yes, but if you’re below full retirement age, your benefits might be reduced if you earn too much.
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