Are you a retiree who would also be considered part of the baby boomer generation? If so, you might be concerned about the 2025 Social Security change to the cost of living adjustment — or COLA, as it is commonly referred to.
The Social Security Administration (SSA) recently announced that the COLA for 2025 will be 2.5%, down from 2024’s and down significantly compared to 2023’s COLA in response to record inflation.
What does this all mean for retired baby boomers and their Social Security COLA for next year? Here are a few things that worry retired boomers most about the 2025 Social Security COLA.
As a retiree and retirement planner, Marty Burbank shared that one of his biggest concerns for 2025 is that Social Security benefits may not keep up with inflation.
“The COLA for 2025 is adjusted based on inflation rates, but there are worries inflation may rise faster than the COLA,” Burbank said, pointing out how this could put a financial strain on retirees relying heavily on Social Security.
“For everyone, inflation has gone down, but the price of groceries, insurance, and other living expenses has not decreased and we shouldn’t expect those prices to go down,” said Deborah Lindner, a retiree in Salt Lake City. “My husband and I spend at least $200 each week for food and almost every other product at the grocery store. That amount seems astronomical, and it blows my mind every month I look at our budget.”
Czajka said, “While inflation seems to be easing a bit, consumers, especially older consumers, have not recovered from [the] grocery process the 2020s have seen so far.”
He pointed out that the average grocery prices tracked by the CPI have risen 24%, with eggs being a big part of the increase.
“Eggs have risen 86% since 2020,” Czajka said. “The Senior Citizen’s League says that rising grocery prices have taken a toll on many retirees.”
Healthcare costs also concerned Burbank while looking ahead to 2025.
“As people age, healthcare needs increase, yet costs continue rising much faster than inflation,” Burbank explained. “Even with Medicare, retirees face high out-of-pocket costs. If Social Security COLAs can’t match these increasing costs, many retirees will struggle.”
It’s not just healthcare insurance that retirees are worried about in regards to COLA, but all types, including automotive, home and long-term care (LTC).
A retiree in the St. Louis Metropolitan Area who wished to be identified by the initials RSM stated that after reading how Missouri’s auto insurance rate hikes ranked the highest in the country “I increased my auto deductible to help mitigate some of the increase, but it remains high. As far as long-term care insurance, I consider it an essential expense.
“I feel extremely fortunate to have been able to purchase this type of policy 20 years ago,” RSM said. “The rates, however, were not locked in, so I get substantial increases every year. The underwriters of these policies in the 2000-2010 decade woefully underestimated the cost for LTC needs of boomers and/or did not anticipate how many of us would maintain the policies for this long.”
“Many retirees today rely on investment income and retirement account withdrawals to fund their lifestyle,” Burbank said. “If markets decline substantially in 2025, as some predict, retirees’ nest eggs and income streams could take a major hit.”
Burbank noted how this may force some boomer retirees into an unexpected “retirement red zone” that threatens their financial security.
Retirees aren’t solely focused on how the Social Security COLA impacts them and their finances; they also are concerned about what it means for loved ones.
“I worry about the people who rely solely on that Social Security check each month, including some members of my own family,” Lindner said.
If other family members are finding that money is tight across the board, it might add more stress to the overall financial situation of seniors who might try lending or giving money to those in their family who are struggling.
According to Burbank, the bottom line is that while no one can predict exactly what 2025 may bring, there are significant worries about Social Security benefits, healthcare costs and investment risks not keeping up with the needs and expectations of many retirees.
“My advice is to save and invest as much as possible, look for ways to generate other income streams, keep healthcare costs low and make contingency plans in case markets drop,” suggested Burbank, adding that “an ounce of preparation is worth a pound of cure.”
