The recent announcement of a modest 2.5% cost-of-living adjustment (COLA) for Social Security checks in 2025 has left many beneficiaries feeling underwhelmed. As inflation begins to ease, so too does the size of COLA increases—yet many retirees still find their benefits lagging behind rising costs. Here, we explore why this latest COLA adjustment may not fully meet seniors’ needs and practical strategies for supplementing income in retirement.
New Social Security checks come with some problems to be addressed
This Article Includes
This will be the lowest cost of living adjustment (COLA) in years
A 2.5% Increase Feels Insufficient After Recent Highs
The 2025 COLA, set at 2.5%, is a marked decrease from the previous few years. For instance, Social Security recipients saw an 8.7% increase in 2023 and 5.9% in 2022. While a 2.5% boost reflects today’s cooling inflation, it can feel like a step backward for seniors who recently adjusted to a more substantial rise in benefits. The difference is especially noticeable when considering the sustained increases in essential costs like housing and healthcare, where even minimal inflation erodes purchasing power.
COLAs Are Falling Short of Actual Living Costs
COLAs are calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), but this index does not fully represent the financial realities of most Social Security beneficiaries. Many retirees live outside urban areas, where unique expenses such as increased healthcare needs are not fully captured by the CPI-W. According to a study by the Senior Citizens League, retirees have seen a significant reduction—up to 36%—in purchasing power since 2000 due to the COLA’s insufficient adjustments.
Strategies for Coping with Lower Social Security Benefits
While the 2.5% COLA may be a modest increase, beneficiaries can take proactive steps to bridge the gap between Social Security and actual living expenses. Here are some effective ways to increase income and enjoy a more secure financial future.
1. Part-Time Work in Retirement: A Viable Option
Many retirees are exploring flexible and enjoyable ways to supplement their income through part-time work, which often provides both financial and personal benefits. In today’s gig economy, retirees can pick jobs that align with their interests and offer a fulfilling experience. For example, a retiree who enjoys animals might consider pet sitting, while a musician could play at local cafes. Working part-time can help close the gap left by a lower-than-expected COLA and may offer an additional sense of purpose.
2. Turning Hobbies into Income Streams
Some hobbies can become small, profitable side businesses, offering a creative and enjoyable way to earn extra money. Here are a few examples:
- Music: For retirees who play an instrument, performing at local events, cafes, or private gatherings can be an enjoyable way to earn money.
- Baking: Those with a knack for baking could sell homemade treats at farmers’ markets, community events, or local stores.
- Pet Care: Retirees who love animals might offer pet-sitting or dog-walking services, which are often in high demand.
- Furniture Making or Craftsmanship: Those who enjoy working with their hands could create and sell custom furniture or other crafts, either online or at local markets.
For retirees who are comfortable with technology and enjoy being on the go, rideshare driving can be a lucrative option. Although it may not be as enjoyable as a hobby, it offers flexibility and provides an option to work according to one’s own schedule. Alternatively, delivering groceries or packages through various gig economy platforms can also generate extra income without the need for long-term commitment.
Overcoming Financial Challenges and Embracing Stability
Although the 2025 COLA may fall short of expectations, beneficiaries can consider these supplementary income strategies to navigate financial constraints. Working in retirement, whether through a hobby, part-time gig, or rideshare driving, can provide not only financial stability but also emotional and mental engagement. Pursuing these options may lead to an enriched retirement experience and provide a safeguard against rising costs not fully addressed by Social Security adjustments.
