50% of retirees may return to work due to insufficient 2025 Social Security Cost of Living Adjustment (COLA)

In an ideal world, you’ll start retirement with a nice pile of savings you’ve built up over the years. In reality, many older Americans end up retiring on Social Security alone. And the people in that boat, unfortunately, are at risk of a world of financial hardship, especially when Social Security benefits don’t increase much from year to year.

This is the case in 2025. Recently, the Social Security Administration announced that benefits would increase by 2.5% in the new year. And while it’s certainly not the smallest Social Security cost-of-living adjustment (COLA) on record, it’s not comparable to recent COLAs.

Image source: Getty Images.

Meanwhile, The Motley Fool polled 2,000 retirees for their thoughts on the 2025 Social Security COLA. And the results were telling.

A good 54% of respondents said they believe next year’s COLA will not be enough. And a staggering 50% said they are considering going back to work because they can’t manage on their own with their Social Security benefits.

If you’re in a similar boat, you may also be contemplating going back to work to some degree. And here’s why you should.

It’s not just about financial benefits

If you’re facing a financial shortfall based on your current retirement income, whether it’s solely Social Security or not, then going back to work in some way is a good idea. A different paycheck from a job can give you the financial room you need to cover your recurring expenses and have money left over for extras.

Plus, you may find that working as a retiree is good for your mental and physical health. Some retirees fall into the trap of staying at home most of the week, either because they are not motivated to go out or because they do not have the money to participate in different activities.

But persistent boredom could wreak havoc on your vision and well-being. Working helps solve this, as it serves as a way to keep busy and a reason to venture out into the world.

In addition, some older people are at risk of health problems due to having an overly sedentary lifestyle. Working out can force you to move, which could help prevent medical problems.

Work while collecting Social Security

There’s no reason to assume you can’t earn money from a job while on Social Security, because you can. The only thing you’ll need to be aware of is the program’s earnings test limits. These apply to you if you are working and receiving benefits before you have reached full retirement age.

In 2025, you can earn up to $23,400 without having your Social Security income withheld. From there, you risk having $1 of Social Security withheld for every $2 of income.

If you reach full retirement age in 2025, you’ll get a higher earnings-tested limit of $62,160. From there, you risk having $1 withheld from Social Security for every $3 of earnings.

You should also know that if you exceed the means-tested limit and end up taking some of your Social Security income, you won’t give it up forever. Any withheld benefits are simply added back to your monthly payments once you reach full retirement age. However, since next year’s earnings test limits are quite generous, it’s quite possible to avoid going over them so you don’t lose any Social Security in the short term.

It’s no surprise that many older Americans aren’t happy with their Social Security COLA in 2025. If you think your finances are about to get worse, start looking for options to get back to work. You might be surprised how good it does you overall.