2 Reasons You May End Up Disappointed With Your Social Security COLA in 2025 -- and What to Do About Them

Social Security recipients are eligible for an automatic cost-of-living adjustment (COLA) every year. The purpose of those COLAs is to make sure that benefits are able to keep up with inflation.

Some people end up collecting Social Security for decades. And frankly, it wouldn't make sense to limit beneficiaries to the same exact monthly check year after year.

Meanwhile, in 2025, Social Security benefits are getting a 2.5% COLA. And that's a raise you may end up unhappy with for the following reasons.

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1. It's the smallest COLA to arrive in years

A 2.5% COLA is by no means the smallest one ever announced. There were several years, in fact, when Social Security benefits got a 0% COLA. But in the context of recent yearly increases, a 2.5% COLA seems stingy.

This year, seniors on Social Security saw their benefits rise by 3.2% in January. The year prior, Social Security got an 8.7% COLA. And the year before that, the COLA was 5.9%.

To be fair, in recent years, consumers of all ages have had to grapple with rampant inflation. And a smaller COLA is an indication that inflation is finally cooling off. But it's hard to get excited about a 2.5% COLA, given the recent raises received by seniors.

2. Social Security COLAs don't tend to keep up with inflation, no matter how large or small they are

Social Security benefits are only rising 2.5% in 2025 because inflation was pretty moderate this year. But even at times when COLAs were larger, they still tended to fail seniors.

The nonpartisan Senior Citizens League says that Social Security recipients had lost 36% of their buying power since 2000, as of last year. That's because the program's COLAs haven't been sufficient.

The problem is that Social Security COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But many Social Security recipients don't live in urban areas, and many aren't wage earners. So it's easy to see why the CPI-W may not accurately capture the costs that Social Security beneficiaries tend to face.

How to overcome a less-than-stellar COLA in 2025

You may be disappointed to learn that your Social Security checks will only rise 2.5% in the new year. And that raise doesn't even account for the fact that Medicare Part B costs might eat away at your increase.

But if you want to get past that minimal COLA and see your financial picture improve, the solution is simple: Find some type of job.

There is good news. Thanks to the gig economy, working during retirement doesn't have to be an unpleasant thing. Quite the contrary -- you could turn an activity you already love into a moneymaker. Some examples include:

• Performing at cafes or bars if you play an instrument
• Selling baked goods at farmer's markets or fairs if you enjoy tinkering in the kitchen
• Caring for people's pets if you love animals
• Designing custom furniture if you're handy enough to do so

These are only a few examples, and you may end up having to resort to a less "fun" gig in retirement, like driving for a ride-hailing service, to make a decent amount of extra cash. But if your finances could use a boost, next year's Social Security COLA is unlikely to move the needle all that much. So you're better off taking matters into your own hands by actively finding a way to generate income.

Who knows? You may find that your new gig does a great job of keeping you busy so that you land in a better place not only financially, but mentally and emotionally, as well.

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