There’s a reason Social Security benefits are eligible for an automatic cost-of-living adjustment (COLA) each year. Many seniors get the bulk of their income from Social Security. Without COLAs, people in that boat would be guaranteed to lose buying power over time due to inflation.

If you’ve been searching all over the internet trying to get information about next year’s Social Security COLA, the good news is that your wait can come to an end this week. On Oct. 10, the Social Security Administration will finally be able to make an official COLA announcement.

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Social Security COLAs are based on third-quarter inflation data. And by Oct. 10, inflation data for the month of September should become available, making that calculation possible.

But even though we’re still a few days away from the big announcement, there’s enough inflation data available already to make an educated guess about 2025’s Social Security COLA. And it’s looking like next year’s raise is going to be smaller than the 3.2% COLA seniors got at the start of 2024.

But a smaller Social Security COLA isn’t necessarily a terrible thing. And it’s important to recognize that so you’re not thrown for a loop when an official number gets released.

It’s really a mixed bag

It’s easy to see why a smaller Social Security COLA might seem like a bad thing — especially if that number ends up roughly in line with recent estimates that are calling for a 2.5% raise in 2025. That’s considerably lower than seniors’ most recent Social Security COLA. And in general, it’s natural to assume that more money in your pocket is better than less money.

But it’s also important to recognize that because Social Security COLAs are based on inflation, a decline in one means there’s also a decline in the other. Put another way, a less generous boost to your Social Security paychecks in 2025 means you may also end up paying less for things like gas, groceries, and other essentials due to cooling inflation.

In other words, when it comes to your personal buying power, things might even out in 2025, leaving you no better or worse than you were in 2024.

There are ways you can change your financial picture for the better

If you’re in a position where you’re reliant on your next Social Security COLA to improve your finances, then here’s a reality check — that’s probably not going to happen. But that’s not a situation that’s specific to 2025’s COLA.

Generally speaking, seniors don’t come out ahead financially once COLAs take effect, because even during periods when they’re more generous, those higher boosts are coming at a time when inflation is more rampant.

If you really want to improve your financial picture in retirement, think about ways you can reduce your spending and boost your income outside Social Security. That could mean downsizing to a smaller home or exploring different areas where living costs are cheaper on a whole.

You may also have some options for generating income so you’re less reliant on your monthly Social Security checks. You could join the gig economy and work a few hours a week. Or, you could see if it’s possible to rent out a portion of your home for steady income. If you have a finished basement you largely don’t use, taking in a tenant may be more than feasible.

And if you’re not yet retired, do what you can to build savings so you have a nest egg to tap on top of Social Security. That way, you’re likely to be less concerned about annual COLAs once your senior years arrive.

There’s only a short wait at this point for an official Social Security COLA announcement for 2025. But be realistic about that raise, no matter what it amounts to. And don’t rely on it to improve your financial situation. Instead, take steps on your own to get to that place so you can better enjoy your retirement in the coming years.

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