The annual cost-of-living adjustment (COLA) that Social Security gives is very important for the millions of people who depend on their benefits to pay their bills. This is especially true for seniors who no longer want to work and want to enjoy their golden years.
As prices go up due to inflation, Social Security COLAs are meant to help seniors keep their purchasing power over time. But because inflation is going down, Social Security benefits will only go up by 2.5% in 2025.
Even though that is not a bad increase, it is disappointing because COLAs have been much higher lately.
Seniors may be upset about a 2.5% COLA, but the increase in Social Security in 2026 could be even less. At this point, beneficiaries should get ready for this to happen.
What will happen with the next Social Security check increase in 2026?
Without a crystal ball, it is hard to say what will happen with the economy in the coming year. But we do know that inflation has been slowly going down over the course of the year. And that is what it is likely to do until 2025.
It also looks like the Federal Reserve is pretty sure that inflation is going down. It dropped its main interest rate by 0.5 percentage points at a meeting in the middle of September. Rates are likely to go down even more soon.
People who get Social Security benefits and consumers in general could both benefit from inflation going down.
The cost of living adjustment might be even less than 2.5% in 2026, though, if inflation stays low next year. Some might say that a lower Social Security COLA is not always a bad thing because it means that inflation is slowing down.
In the past, Social Security COLAs have not kept up with inflation, which makes it hard for many seniors to see things that way in real life. So, the smartest thing to do is to depend less and less on Social Security COLAs over time.
Gig work or a part-time job can help you make more money if you are already retired and can not go back in time to save for retirement. The second one might work better for you. If you have a job, you might also have something free to do during the week.
This makes it easier to get by on a small salary. But if you have not retired yet, this should wake you up to the fact that you need to start saving as much money as you can so you do not have to worry about Social Security COLAs every year when you stop working.
Having even a small nest egg can help you avoid being in a tough spot if your Social Security benefits are only slightly raised one year. You can save $100 a month for retirement.
If you do this for 30 years and get an average annual return of 8% on your portfolio, which is a little less than the average return on the stock market, you will have $136,000.
Even if you do not save more than that, that gives you a small amount of money to use if Social Security’s COLAs are not enough. Remember that saving more would be better.
How can beneficiaries avoid jeopardizing their retirement benefits?
Inflation, which is a big worry for American seniors, came up a lot in the 2024 presidential election.
Even though prices are high at stores and restaurants, retirees face much bigger financial risks, and many of them are their own fault. That is why we are going to tell you about three money moves you should think about when you retire.
Using equity to save for retirement
If you sell your house and move into an apartment to live off the equity, you could lose all of your money very quickly. Say you sell your Chicago home and get $400,000 in cash.
A trendy two-bedroom apartment in Lincoln Park’s neighborhood usually costs between $2,400 and $4,500.
Your money would only last less than 10 years if you spend $41,400 a year, which is more than 10% of your equity at a midpoint of $3,450. You would then have nothing to leave your children and grandchildren.
Relying on post-retirement employment to cover expenses
The Survey of Consumer Finances from the Federal Reserve found that 54.4% of American families have a retirement account. This means that a lot of seniors will still be working after they retire.
But health in retirement is hard to predict. The U.S. Centers for Disease Control and Prevention say that every year, more than one in four seniors falls, which leads to three million trips to the emergency room and one million stays in the hospital.
Overspending
More than one-third of retirees surveyed by the Employee Benefit Research Institute said that their travel or leisure costs were higher than expected.
This suggests that even though it may be tempting to buy a fancy sports car, it is best to keep your spending in check to avoid having buyer’s remorse. In addition, it can be much harder to find a job.
Some people under 60 still have trouble finding work, even though they are qualified—maybe even too qualified. As time goes on, it is also easy to forget the newest skills that people want.
Also see:-Upcoming Social Security Cuts Announced – Checks Will Change Starting From This Date
