What retirees need to know

HUNTSVILLE, Ala. (WAFF) – Each year, Social Security recipients receive a cost-of-living adjustment, or COLA, designed to help offset the impact of inflation on their benefits. This week, we sat down with The Welch Group’s Jay McGowan to discuss what seniors can expect by 2025 and why this adjustment is more important than ever.

Social Security is a lifeline for millions of Americans, and many depend on it for a significant portion of their income. This year, beneficiaries saw a 3.2% adjustment to their benefits, down from the 8.7% increase in 2023. Financial expert Jay McGowan explains that the 2025 COLA is expected to be even lower, around 2.57%, based on third quarter inflation. readings

“In 2025, we’re looking at a more modest adjustment compared to the last two years. The expected COLA of 2.57% still reflects inflation, but it’s much smaller compared to what we saw in 2023.”

Over the past 20 years, the average COLA has been around 2.63%, so this next adjustment is fairly typical. However, with 40% of Americans relying on Social Security for more than half of their income, and 14% relying on it for 90% or more, even small changes can have a big impact.

“For many retirees, Social Security is a critical part of their financial stability, but it’s important to recognize that these adjustments can also have side effects, such as pushing someone into a higher tax bracket or increasing their health insurance premiums. Medicare.”

A key concern heading into 2025 is the expected 6% increase in Medicare Part B premiums. That increase could offset any COLA benefit, especially for those on a tight budget.

“Retirees should prepare for rising health care costs. Many people will see a significant portion of their COLA increase eaten up by Medicare premiums. So it’s important for people to start preparing and save now”.

He added: “Now is the time to develop other sources of retirement income. We expect challenges ahead with the long-term solvency of Social Security, and it is essential that retirees have a backup plan.”

With adjustments to Social Security and rising health care costs, it’s more important than ever for retirees to plan ahead. Jay McGowan recommends working with a financial advisor to navigate these changes.

For more information about The Welch Group, click here.

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