For a large share of American retirees, Social Security provides a majority of their income. And for too many retirees, those monthly payments are the only income they have access to.

Thankfully, Social Security benefits are raised automatically nearly every year to help them compensate for inflation. Without those cost-of-living adjustments (COLAs), recipients would practically be guaranteed to see their financial situations worsen from year to year as inflation gradually erodes the value of a dollar.

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This month, Social Security recipients saw their payments increase by 2.5%. It just so happens that was the smallest COLA in years. That isn’t necessarily a problem, though, because smaller COLAs are typically a reflection of lower inflation.

But based on recent data, it’s clear that 2025’s Social Security COLA is already failing to keep up with inflation. If things don’t turn around, many retirees could end up struggling as the year goes along.

There’s already a loss of buying power

Each year’s Social Security COLA is based on the inflation data from the prior year’s third quarter. So the 2.5% COLA seniors got this month was calculated based on inflation from July through September of 2024. The Social Security Administration made its official 2025 COLA announcement in October.

COLAs, though, are not adjusted during the year to account for month-to-month changes in inflation. Once a COLA is announced, that’s the raise for the entire following year.

The reason that’s problematic for seniors today is that in December 2024, the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is the index Social Security COLAs are based on, rose by 2.8% on an annual basis. It doesn’t take a math genius to recognize that a 2.8% uptick in inflation is greater than the 2.5% raise benefits got for 2025. If inflation continues to tick upward, it could put American retirees at a disadvantage over the next 11 months.

It’s best not to rely too heavily on Social Security

Given that even with COLAs, Social Security benefits don’t always maintain their buying power over time, it’s better to avoid entering retirement too dependent on the program. The good news for folks who are still working is that they still have opportunities to build up nest eggs they can use to supplement that income in retirement. But those who are already retired have fewer options. That doesn’t mean they have no options, though.

If you’re retired and are already having a hard time covering your expenses this year based on your monthly Social Security checks, one thing you could look into is getting a part-time job. Thanks to the booming gig economy, working part-time doesn’t have to be painful.

And if you’re wondering whether earnings from a job will impact your Social Security checks, the answer is that it depends on your age and how much money you make. If you’ve already reached your full retirement age (FRA), you can earn any amount of income from employment without it impacting your benefit checks. But if you haven’t, you will be subject to an earnings limit.

That limit does not actually prevent you from earning more while you’re technically retired, but if you do, some of your Social Security benefits will be withheld. For 2025, the limit is $23,400. For every $2 a retiree below their FRA earns above that limit, $1 will be withheld from their benefits. The exception is if you’ll reach your full retirement age by the end of the calendar year. In that case, the limit is $62,160, and if you go over that amount in the months before you reach your FRA, for every $3 in excess you earn, $1 will be withheld. (Those funds aren’t gone for good, though. The program recalculates retirees’ benefits after they reach FRA to give them credit for the benefits withheld due to excess earnings.)

Regardless, even the lower limit buys you some wiggle room to earn money on the side to supplement your monthly benefits.

Another plus of working part-time is that if you currently lack retirement savings, your extra income might enable you to build some. You could then put that money into a combination of CDs, bonds, and even some stocks, all of which have the potential to generate ongoing income and improve your financial picture substantially.

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