Social Security retirees got some good news recently. In an October 10 announcement from the Social Security Administration, seniors were informed they’ll be receiving a cost of living adjustment (COLA). This means that, starting in 2025, their benefit checks are going to be bigger.

While a raise is undeniably a good thing for seniors, there’s also some bad news to be aware of and plan for. Here’s what retirees need to know about how their benefits are going to change come January.

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The cost of living adjustment isn’t all good news for retirees

The announcement from the Social Security Administration contained good news in that it alerted seniors to the fact they’ll be getting a raise. This is not necessarily guaranteed. While COLAs happen in most years, they don’t occur every year. In fact, in 2010, 2011, and 2016, retirees received no COLA at all.

For 2025, seniors will be getting a benefits increase of 2.5%. That means the typical retiree will see their Social Security check increase by around $50 a month. While that’s not a ton of money, it’s certainly better than no raise at all.

The announcement also came with bad news, too, though. The 2.5% raise is lower than the average 2.6% benefits increase that seniors have enjoyed over the past decade. It’s also considerably lower than the COLAs retirees have received over the past several years, as they received a 5.9% benefits increase in 2022; an 8.7% raise in 2023; and a 3.2% raise in 2024.

With retirees used to seeing a much larger bump up in benefits, getting only 2.5% more in their checks is sure to be a financial shock.

It’s important to put the bad news in perspective

While a smaller-than-anticipated raise isn’t great for retirees, it’s also worth considering that the raise is fairly generous by historical standards even if it’s lower than the COLAs seniors have been given in the post-pandemic era.

In fact, since the year 2000, there have been a total of 10 years when the COLA was below 2%, including the three years mentioned above when seniors saw no benefits increase at all. Compared to a 0% raise, or a 0.3% raise like retirees received in 2017, a 2.5% cost of living adjustment isn’t so bad.

It’s also worth noting that COLAs are tied directly to a change in the third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers. If the third quarter CPI-W data shows prices are higher year-over-year, retirees get a benefits increase based on the change.

So, a smaller COLA means that inflation has cooled, which, on the whole, is good news for retirees who likely also rely on money from savings and investment accounts that loses value when inflation is surging.

Seniors should come to terms now with the fact that the smaller COLA is a mixed blessing and should plan their 2025 budget accordingly, anticipating that their checks are going to get a little bit bigger but that the big benefits bumps they’ve enjoyed in recent years are a thing of the past.

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