If you’re among the millions of older Americans who rely heavily on Social Security to make ends meet in retirement, then you may be reeling over the fact that your benefits are only going to rise by 2.5% in January.

Social Security’s upcoming cost-of-living adjustment (COLA) is the smallest (by far) to arrive in years. And it’s natural to be disappointed by a meager increase in your monthly checks.

But when we look back at the data, it becomes clear that a 2.5% Social Security COLA isn’t so terrible. In fact, it’s a lot more generous than some of the COLAs beneficiaries have seen in the past.

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The outcome could’ve been much worse

In 2024, Social Security benefits rose by 3.2%. The year prior, they increased by 8.7%. And in 2022, a 5.9% COLA came through.

In light of these numbers, it’s easy to see why a 2.5% COLA for 2025 seems like a slap in the face. But you should also know that these recent COLAs were fueled by a period of rampant inflation.

The whole reason 2025’s Social Security COLA is going to be much smaller is that inflation has eased nicely over the past year. So what seniors lose in the form of a smaller COLA, they gain in the form of less drastic price increases on their essential expenses.

It’s also important to recognize that a 2.5% Social Security raise is by no means the worst-case scenario as far as the program’s COLAs go. On three separate occasions — 2010, 2011, and 2016 — seniors on Social Security got a 0% COLA. And as recently as 2021, Social Security’s COLA was only 1.3%. So while a 2.5% COLA may not exactly be cause for celebration, it’s also not a catastrophically low raise.

How to make a 2.5% COLA work for you

If you’re already feeling like you can barely cover your living costs in retirement, then a 2.5% Social Security COLA may not do much to change your financial picture in 2025. So if that’s the case, be proactive in bettering your finances.

Start by re-evaluating the things you spend money on. Is it really necessary to pay for a car when you have access to public transportation around the corner and a host of neighbors you’re friendly with who have vehicles you could potentially borrow or get rides in? Do you need to hang on to your 2,400-square-foot home when a property half that size could be a lot less expensive to maintain?

Next, reassess your ability to earn money. You might assume that if you’ve been retired for years, it’ll be too difficult to break back into the workforce. But there may be opportunities to consult in your former field if you have unique skills, or if you’ve kept up on industry changes. Plus, there’s always the gig economy, which is available to you regardless of your age or the number of years you’ve gone without a job-related paycheck.

It’s not a strange thing to wish for a larger boost from Social Security than the 2.5% raise that’s about to arrive in 2025. But it’s also important to put that increase in perspective, and to take steps of your own to make up for a COLA that isn’t what you want it to be.

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