2025 Social Security COLA Shocker: Retirees Hit Hard by Unexpected Changes

Some seniors have struggled to accept the adjustment of Social Security cost-of-living. In fact, for others, the situation is so grave that they are considering returning to work to supplement their income.

The Motley Fool conducted a poll in October, just after the COLA announcement, with 2,000 American seniors participating, and the results were concerning: 50% are considering giving up retirement to earn more money. It is frequently given as a solution when seniors ask how they can improve their retirement savings, as looking for part-time, flexible work can be a great way to increase income, get better health insurance, and make more interpersonal connections to combat loneliness, but the 50% rate is concerning.

This disparity in lifestyle undoubtedly contributes to the fact that 54 percent of seniors polled believe the latest COLA is insufficient, particularly compared to the 8.7 percent in 2023 and the 3.2 percent in 2024. Many people don’t care that the lower COLA is a good indication, as Jack Caporal, The Motley Fool’s research head, explains: “The average monthly Social Security payout in 2024 after the 3.2 percent COLA is $1,907. That is less than half of the $5,007 per month paid by Americans 65 and older in 2023. Given that only 54% of American households will have a retirement account in 2022, it’s not unexpected that a sizable proportion of retirees questioned believe they need additional sources of income.

This could be part of the problem; Social Security benefits were never expected to cover all of a retiree’s expenses, at most 40%, but the reality is that a sizable portion of American seniors are entirely financially reliant on their benefits; at least 28% of those polled rely solely on their benefits to get by. An additional 32 percent rely substantially on their payments, accounting for more than half of those surveyed.

The underlying issue is the impact of a low COLA on Social Security benefits:

The fundamental issue, according to the Older Citizens League (TSCL), a nonpartisan group that works in the interests of older citizens, is that the typical Social Security benefit in 2024 will be worth just approximately 80 cents on the dollar compared to 2010, which was 14 years ago. This suggests that seniors are losing purchasing power despite the changes. 

They are one of the strongest supporters of the CPI-E as a metric. Shannon Benton, executive director of TSCL, adds, “This year represents another missed chance to provide seniors with the financial relief they need by shifting the COLA calculation from the CPI-W to the CPI-E, better-reflecting seniors’ changing spending. Seniors—and TSCL—demand that Congress take immediate action to strengthen COLAs so that Americans can retire with dignity, such as implementing a 3% COLA and altering the COLA calculation from the CPI-W to the CPI-E. According to our research, 67 percent of seniors rely on Social Security for more than half of their income, and 62 percent are concerned that their retirement income would not cover basic expenses such as groceries and medical bills.