All Social Security Retirees Should Do This on Oct. 10

Social Security is an important piece of many seniors' retirement budgets. Six in 10 retirees said their monthly checks are a major source of income in the most recent edition of an annual Gallup poll.

In recent years, however, Social Security retirees have had to withstand some of the highest inflation rates we've seen in over 40 years. Prices for housing and healthcare, two areas where seniors spend a lot, have been especially impacted in recent years.

Social Security includes an annual cost-of-living adjustment (COLA) to help retirees' monthly benefits keep up with rising prices. And the high inflation of the last three years has led to some substantial increases in benefits.

2024 finally saw inflation start to cool off; still, prices remain high for many retirees. But cooling inflation could mean a lower COLA for Social Security retirees.

That's why Oct. 10 is an important date. In just a few days, the Social Security Administration will announce the 2025 Social Security COLA. Here's exactly what to do that morning and what to expect.

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Mark your calendar

Each year, the Social Security Administration calculates the next year's COLA based on the inflation data from the third quarter. It uses a subset of the Consumer Price Index known as CPI-W, which tracks a basket of goods representative of the spending of urban wage earners and clerical workers.

The Bureau of Labor Statistics will release the September CPI data at 8:30 a.m. ET on Oct. 10. Shortly thereafter, the SSA will release the official 2025 COLA in the Communications Corner on its website.

The press release will detail the percentage increase for Social Security benefits in 2025. It'll also likely detail the average increase in benefits in a nominal amount.

Here's what to expect

As mentioned, the COLA is based on inflation levels in the third quarter. Luckily, we already have two months' worth of data from the quarter, which provides a very narrow range of likely outcomes, given September's CPI reading.

At this point, retirees should expect a 2.5% COLA for next year. There's a wide range of potential September CPI-W readings coming in between 2.1% and 2.4% year-over-year growth that will result in that COLA. The Senior Citizens League also put 2.5% as its best guess for next year's COLA after the August CPI release.

The 2025 COLA will be much lower than recent years. Seniors received raises of 5.9%, 8.7%, and 3.2% in 2022, 2023, and 2024, respectively. Even so, 2.5% is still above the average COLA of 2% received over the previous 20 years.

What you can do to improve your benefits

Retirees collecting Social Security have limited options to improve their benefits if the annual COLA is failing to meet their needs.

If you have your own retirement savings you can rely on, you have some more flexibility. You may be able to withdraw or suspend benefits and earn delayed retirement credits while living primarily off your existing savings. In exchange for foregoing your monthly check today, you can receive a bigger check later. But that's not a feasible option for many.

If you're still working, you may be able to increase your wages faster than inflation. That could have the added benefit of increasing your Social Security benefit in the long run, but could result in a smaller check today due to the retirement earnings test. (The SSA will also announce new limits for the earnings test on Oct. 10.)

If the Social Security COLA isn't keeping up with your expenses, you may need to consider some significant moves to cut your expenses. That could mean moving to a lower-cost of living area or a tax-friendlier state.

It's only a matter of days before you can learn exactly what you'll receive from Social Security in 2025. While you might find the 2025 COLA disappointing, retirees may be able to take solace in the fact that a low COLA means inflation is finally cooling off after three very tough years. In general, low and steady inflation is good for retirees' budgets. So, while a lower COLA might sting, it could work out for the best in the long run.

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