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2.57% Social Security COLA Boost Slated for 2025: What Retirees Need to Know

2025 Social Security COLA Increase

Retirees to See Boost in Social Security COLA Checks in 2025

Good news is on the horizon for retirees as they can expect a boost in their Social Security COLA checks starting in 2025. This increase is due to a notable cost-of-living adjustment (COLA). Although the adjustment is more moderate compared to recent years it’s still a positive change for retirees. Social Security COLA helps retirees maintain their purchasing power amidst rising living costs. Since many seniors rely on Social Security COLA for a significant portion of their income even a small increase can make a meaningful difference. However, it’s important to note that a higher COLA can also indicate high inflation which may have negative tax implications for retirees who are already struggling financially.

According to FinanceBuzz, the Senior Citizens League has updated its expectations for the 2025 Social Security COLA predicting a 2.57% increase. This is slightly lower than the previous estimate of 2.66% but a lower number is actually beneficial for retirees. Here’s why. High inflation has been a challenge for Social Security recipients. Retirees who started receiving benefits in 2000 have lost 36% of their buying power due to inflation outpacing their benefit increases. But with low and stable inflation, Social Security recipients fare better. Historical data shows that buying power improves when the COLA is less than 3%. Since 2010 there has been a 13% cumulative increase in purchasing power when the COLA was under 2%.

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2.57% Social Security COLA Boost Slated for 2025: What Retirees Need to Know (PHOTO: Yahoo Finance)

Boosting Benefits and Reducing the Tax Burden for Retirees

Furthermore, lower COLAs can help retirees avoid higher taxes on their Social Security benefits improving their purchasing power. More retirees may find their benefits taxable as benefits increase which reduces their net income. Lower COLAs can help keep more benefits tax-free easing the tax burden on retirees. The Federal Reserve remains cautious about inflation and their stance could influence future COLA estimates. Although May’s Consumer Price Index (CPI) numbers were encouraging inflation is still above the Fed’s 2% target which keeps the outlook for COLA uncertain. Overall, the expected COLA for 2025 is a positive development for retirees. While Social Security checks will be slightly higher a more moderate increase means better purchasing power and potentially lower tax liabilities. This adjustment can provide much-needed financial relief and stability for those who depend on Social Security, helping them cope with the rising cost of living. Retirees should view this potential increase as a welcome boost to their financial security in the coming year.

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