The reason Social Security benefits are eligible for an automatic cost-of-living adjustment (COLA) each year is that without an inflation-based boost, seniors would be guaranteed to lose buying power from one year to the next. This doesn’t mean that Social Security’s COLAs are always on the generous side, though.

Case in point: In 2025, Social Security benefits are only rising by 2.5%. That’s the smallest COLA to arrive in years. And it’s a raise that many seniors may be quite unhappy with.

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If you depend heavily on Social Security to make ends meet in retirement, then it’s important to know what 2025’s 2.5% COLA actually means for your wallet. Here’s what to expect.

The average monthly benefit won’t increase all that much

The average monthly Social Security benefit is expected to increase from $1,927 to $1,976 once 2025’s COLA takes effect. That’s an average increase of $49. But that doesn’t tell the whole story.

The cost of Medicare Part B will be rising in 2025. Currently, the standard monthly premium for Part B is $174.70, but in 2025, it’s going up to $185.

When we account for that, it means the average Social Security benefit won’t rise by $49 in 2025, but rather, more like $39. That’s not a huge increase given the way living costs have been on the rise.

Of course, not every Social Security recipient will be impacted by an increase in the cost of Medicare Part B, since some beneficiaries aren’t yet on Medicare. Social Security eligibility begins as early as age 62, whereas Medicare eligibility doesn’t start until age 65. So it’s more than possible to collect benefits without being a Medicare enrollee.

But because so many seniors are signed up for both programs at the same time, it means many will see an even smaller increase to their benefits in 2025. Part B premiums are paid out of Social Security benefits automatically, resulting in smaller checks.

How to make up for a minimal Social Security increase

If your monthly Social Security check will only be rising by about $39 in 2025, then you may be worried about covering your expenses. And if that’s the case, it may be time to look at some big lifestyle adjustments.

One nice thing about Social Security is that you’ll get the same benefit no matter where you live. So if you’re able to relocate to a part of the country that’s less expensive overall, your financial picture might seriously improve.

Another thing worth looking at is downsizing if your home is currently eating up a lot of your Social Security income. Shedding square footage could mean paying a lot less for things like maintenance and utilities. And if you have a good reason to hang onto a larger home, such as wanting to stay in your community, see if it’s possible to rent out a portion of it instead of moving.

Finally, don’t write off the idea of working in some capacity. If the idea of a preset schedule doesn’t appeal to you, look at gig roles that allow you to set your own hours for more flexibility.

Social Security benefits are only going to rise modestly in the new year, and that’s something seniors should prepare for immediately. But also know that you’re not doomed to a cash-strapped lifestyle because next year’s COLA is only 2.5% and the cost of Medicare is going up. With the right adjustments, you can set yourself up to be more comfortable financially in spite of those circumstances.

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