Social Security benefits get a 2.5% cost-of-living adjustment (COLA) in 2025. Here’s how much the average benefit will actually increase.

The reason Social Security benefits are eligible for an automatic cost-of-living adjustment (COLA) each year is that without an increase based on inflation, seniors would be guaranteed to lose purchasing power by a year to year. This doesn’t mean that Social Security COLAs are always generous.

Case in point: In 2025, Social Security benefits will only increase by 2.5%. This is the smallest COLA to arrive in years. And it’s an increase that many older people might be very unhappy about.

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If you rely heavily on Social Security to make ends meet in retirement, it’s important to know what 2025’s 2.5% COLA actually means for your portfolio. Here’s what to expect.

The average monthly benefit will not increase much

The average monthly Social Security benefit is expected to increase from $1,927 to $1,976 once the 2025 COLA takes effect. This represents an average increase of $49. But that doesn’t tell the whole story.

The cost of Medicare Part B will increase in 2025. Currently, the standard monthly premium for Part B is $174.70, but in 2025 it will increase to $185.

When factoring this in, this means that the average Social Security benefit will not increase by $49 in 2025, but rather by $39. That’s not a huge increase given the rising cost of living.

Of course, not all Social Security beneficiaries will be affected by an increase in the cost of Medicare Part B, since some beneficiaries do not yet have Medicare. Eligibility for Social Security begins at age 62, while eligibility for Medicare does not begin until age 65. Therefore, it is more than possible to receive benefits without being enrolled in Medicare.

But like so many old people are enrolled in both programs at the same time, that means many will see an even smaller increase in their benefits in 2025. Part B premiums are automatically paid from Social Security benefits, resulting in smaller checks .

How to compensate for a minimal increase in Social Security

If your monthly Social Security check will only increase by about $39 in 2025, you may be worried about covering your expenses. And if that’s the case, it may be time to consider some big lifestyle adjustments.

The great thing about Social Security is that you’ll get the same benefits no matter where you live. So, if you are able to move to a part of the country that is generally less expensive, your financial situation could improve significantly.

Another thing worth looking into is downsizing if your home currently takes up a large portion of your Social Security income. Losing square footage could mean paying a lot less for things like maintenance and utilities. And if you have a good reason for keeping a larger home, such as wanting to stay in your community, see if it’s possible to rent part of it instead of moving.

Finally, don’t rule out the idea of ​​working in some capacity. If the idea of ​​a set schedule doesn’t appeal to you, consider gig roles that allow you to set your own hours for flexibility.

Social Security benefits will only increase modestly in the new year, and that’s something seniors should prepare for immediately. But also know that you’re not doomed to a cash-strapped lifestyle because next year’s COLA is only 2.5% and the cost of Medicare is increasing. With the right adjustments, you can prepare yourself to be more financially comfortable despite these circumstances.

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