It is common knowledge that seniors who receive Social Security payments are eligible for an annual cost-of-living adjustment (COLA), which is considered to be an automatic increase.
This is done to assist people in keeping up with inflation and maintaining their purchasing power; however, one thing that Cost of Living Adjustments (COLAs) are not intended to accomplish is to boost benefits.
One of the primary reasons why knowledgeable individuals advise beneficiaries not to rely only on benefits to meet their requirements during retirement is because of this.
It was never anticipated that benefits would be able to take the place of a salary; rather, they were projected to provide approximately forty percent of the cash required to cover expenses. Despite this, a significant number of seniors rely on their Social Security check to make ends meet.
Following the 2.5% increase that was implemented this year, many retirees are having a difficult time determining how they will be able to make ends meet in the coming year.
The impact of a low COLA on retirees Social Security benefits
Those individuals who are dependent on Social Security in some manner, such as Medicare, will benefit from the rise in terms of their financial situation.
This means that the average monthly Social Security payment in 2024 will be $1,927, and when we add the cost-of-living adjustment of 2.5%, the amount will increase to $1,976 in 2025.
This is only a $49 increase, which, when we take into account the Medicare Part B increase that has already been announced (the regular monthly premium for Part B is currently $174.70, but it is going up to $185 in 2025), will leave beneficiaries with only $39 dollars more over the course of the month to pay expenses.
This does not imply that every beneficiary will receive the same increase; rather, those who have checks that are higher will receive more, while those who have checks that are lower will receive less additional money.
Some recipients are not even eligible for Medicare, therefore this particular scenario will not apply to them. This is because eligibility for Social Security begins as early as the age of 62, whereas eligibility for Medicare does not begin until the age of 65.
Regardless of the increase and the services that you have signed up for, the increase of 2.5% will not be sufficient for the majority of people to cover the increase in expenses that they have experienced in 2024, when inflation surpassed the COLA in the first half of the year.
What is more, it will not even be enough to make up for some of the savings that they used up to cover the difference in their anticipated expenses.
How to make up for a minimal increase
When you are a regular worker, it is simple to say, “Well, just get a higher salary or a different job that pays better, or just move.” However, when you are an older worker, answering this question can be a little bit more tricky.
In spite of the fact that it may be challenging to make certain alterations to one’s way of life, the improved financial situation may be worth the sacrifice. The fundamentals of the topic continue to be applicable.
Due to the fact that benefits are determined by your record rather than your address, relocating to a region of the country that is less expensive is the most effective approach to boost your disposable income without requiring a significant amount of work.
It might be challenging to part ways with friends and relatives, but the sooner you establish yourself, the better, because you will be able to construct a support system on which you can rely in the event that you require it.
One additional advantage of this is that it can provide you with additional money through the selling of a house in a region with a higher cost of living or through passive income from the renting of the house.
In point of fact, even if you are staying in the same city, you still have the option to sell your home, reduce it, or rent it out.
Even while it could be tempting to keep the house, you should think about how much of your salary is going to be spent on maintaining it and whether there are other options available to you that might be more suitable for your lifestyle. It is also simpler to clean, heat, and cool a smaller house than a larger one.
As a final resort, if you are physically capable of doing so, you can think about going back to work in a work environment that offers flexible part-time jobs.
There is no requirement that it be a work with a high level of pressure or even in your specialty; but, it would provide additional income in addition to some contact with other people, which could help prevent feelings of loneliness.