Hate the idea of ​​worrying about a Social Security COLA for 2025? Here’s what to do.

How much will Social Security benefits increase in the new year? This is a big question on many people’s minds as we get close to setting an official cost of living adjustment (COLA) for 2025.

The purpose of Social Security COLAs is to ensure that beneficiaries do not lose purchasing power when the cost of living is driven up by inflation. At the start of 2024, Social Security benefits increased by 3.2%. But based on what we know so far, it looks like the 2025 Social Security COLA will be a little stingier.

Initial estimates suggest a COLA of 2.5% in 2025. And that number could shift downward if the September inflation reading (which is not available at this point) turns out cooler than expected.

If you’re worried that a smaller Social Security contribution in the new year could hurt your finances, that’s understandable. But it also means it may be time to make a major change in the way you approach your retirement finances.

You don’t want to rely on Social Security COLAs

Social Security COLAs have long stopped helping beneficiaries actually keep up with inflation. So it’s not good at all to be in a situation where you have to rely on a generous person. And if you find yourself in this situation, it may be time to make big changes.

However, these won’t necessarily be easy changes. And that can be difficult to understand. But if you’re living paycheck to paycheck in retirement and your only source of income is Social Security, pushing yourself to make difficult changes could ease some of your financial burden in the future.

The first thing you need to do is evaluate your spending and see where there is room to cut corners. And the answer may not be obvious. But if you dig deeper, you may find that you can actually build a smaller home — one that’s less expensive to maintain and pay property taxes. And if you rent, you may be able to save some space so you can write a smaller check to your landlord each month.

You can also think about where you live. Social Security pays you the same amount of money regardless of your city or state of residence. And while some states Do Social Security often has exemptions for low earners – a category you’ll likely fall into if these benefits are your only source of income. If you live in an area with a high or even moderate cost of living, moving to a place with a lower cost of living can help you extend your benefits even further.

Finally, be honest about your ability to work in any capacity. Some seniors have health problems that prevent them from getting a job. But if that doesn’t apply to you and you just don’t do it want When you go to work, ask yourself this: Would you rather work a few hours a week or have to skip meals and medications because of a lack of money?

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Also remember that work today doesn’t necessarily have to mean taking shifts at a local store or doing administrative work in an office. The gig economy offers numerous opportunities to earn income at your own pace. You could sell baked goods at local farmers markets, provide occasional childcare services, or even drive paying passengers around town in your car.

A harmful cycle worth breaking

On October 10, the Social Security Administration will announce an official COLA for 2025. But if that number makes a big difference in your finances, that’s a problem. Therefore, no matter what the COLA is next year, if you are tired of worrying about money day after day, it is wise to consider the above changes.

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Hate the idea of ​​worrying about a Social Security COLA for 2025? Here’s what to do. was originally published by The Motley Fool