January 1, Social Security Increase Falls Short as Seniors Face Rising Costs

The recent update on the Social Security cost-of-living adjustment (COLA) signals that 2025 could be challenging for seniors. New projections indicate that retirees will see an increase of just 2.5%, equating to an average monthly boost of only $48, according to The Senior Citizens League (TSCL). “While 2.5% is lower than the 3.2% received in 2024, it wouldn’t be far from the historical norm. The COLA has averaged about 2.6% over the past 20 years. It went as low as 0.0% in 2010, 2011, and 2016 and as high as 8.7% in 2023,” TSCL reports.

Expenses continue to rise, making it increasingly difficult to survive on just Social Security. “Due to a higher cost of living, older Americans are using more and more of their income each month just to get by compared to a year ago,” TSCL highlights. In their 2024 Retirement Survey, 65% of seniors reported monthly expenses of at least $2,000, up from 55% in 2023, proving the economic strain is real and significant.

Retirees are understandably worried about their Social Security benefits’ long-term sustainability. Less than half believe they have enough to live comfortably through retirement, and nearly 90% are concerned that inflation will erode their savings’ value, according to the 2024 U.S. Retirement Survey by investment manager Schroders.

Seniors are struggling to cover basic necessities, let alone engage in discretionary spending. “A rise in monthly expenses wouldn’t be much of an issue if seniors’ higher expenses were going to fun activities, like spending time with their grandchildren or taking bucket-list vacations,” TSCL notes. “However, that’s not the case. Nearly 80% of senior households in the 2024 survey reported that their monthly budget for essential items like food, housing, and prescription drugs had increased over the last 12 months, with 63% saying they’re worried that their income won’t be enough to cover these basic costs in the coming months.”

The upcoming 2.5% rise is the lowest since 2021, sparking concerns among those who rely heavily on Social Security. “Ensuring that seniors have enough to feed and house themselves with dignity is a major reason why we advocate for a minimum COLA of 3%,” says Shannon Benton, TSCL’s Executive Director. Research shows that about two-thirds of seniors depend on Social Security for more than half of their monthly income, and 28% rely on it entirely.

Experts suggest smart financial planning to navigate the low COLA projections. Unfortunately, Social Security recipients have limited options beyond prudent budgeting and potentially part-time work. However, high-yield savings accounts and certificates of deposit (CDs) are worth considering, as today’s high interest rates could provide a little extra cash in the future.

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