The 2025 Social Security increase that millions of Americans will be banking on next year may just turn out to be a financial letdown. This cost-of-living adjustment, otherwise referred to as COLA, is supposed to keep in line with inflation to ensure consumers retain their buying power. However, next year’s increase is expected to be lower than anticipated. This news comes at a time when retirees are already feeling the effects of insufficient cost-of-living adjustments.
Robert Brokamp, a senior retirement advisor at The Motley Fool, an investment guidance firm, commented on this financial insufficiency with Newsweek:
“The problem is that this inflation is often based on a big basket of goods and services that don’t necessarily align with how most retirees spend their money. For example, the COLA was 3.2% [in 2024], but Medicare premiums went up almost 6%. So, I think there’s an issue with how we measure inflation for retirees versus inflation for the rest of America.”
Related Article: Retiring on Rental Income vs Social Security – A Financial Comparison
Given that Social Security increases are unreliable and generally not enough to get by without skimping, many individuals have turned to investing in rental real estate. Depending on the number of properties owned, this strategy can provide a steady stream of monthly income that surpasses the payments received from Social Security benefits.
Next Year’s Social Security Boost – The Disappointing Numbers
This month, the Senior Citizen League (TSCL), an advocacy nonprofit, projected a 2.57% cost-of-living adjustment for 2025, which is lower than last month’s prediction of 2.66%. Other prediction reports indicate a slight uptick from this, estimating a 3% increase for Social Security recipients. Either way, these lower figures are on track to disappoint most people who are retired. This is especially true when you compare these numbers to this year’s increase of a 3.2% COLA and the significant 8.7% increase that was seen last year.
The bottom line is that for those already struggling financially, this smaller adjustment could pose additional financial challenges. Also, if the adjustment doesn’t keep pace with inflation, retired individuals who’ve worked hard to enjoy their golden years will face struggles they didn’t anticipate. According to the graph below, those depending upon Social Security increases may have to find alternative ways to fund necessities.
Cost-of-Living Adjustments Over the Years
Dismal 2025 Social Security Increase Projection Pushes Retired Individuals Back to the 9 to 5 Lifestyle
As highlighted in a recent survey by the Motley Fool, an increasing trend shows that more retired individuals are contemplating heading back to work due to the financial strain of persistent inflation. Approximately 44% of those surveyed expressed they’re considering going back to work because their Social Security payments haven’t matched the rising cost of living. With lower increases projected for 2025, many of those who are retired will be forced to live the 9 to 5 life once again.
Additionally, although Social Security beneficiaries got a 3.2% COLA increase this year, the survey results indicate that retired people continue to face financial hardships. This struggle is mostly because inflation rates surpassed the 3.2% adjustment in the previous three months.
As reported by the Social Security Administration, the typical monthly benefit in 2024 amounts to $1,907. With today’s high inflation, this amount would barely cover rent, if at all, along with food, gas, and other necessities. On top of this, many Americans receive lower-than-average benefits. With that said, a 2025 social security increase that is projected to come in lower than this year is concerning.
Investing in Rental Real Estate: A Better Financial Safety Net
Those who would rather not be at the mercy of the government’s dismal social security checks should consider investing in real estate. Rental properties create a consistent monthly income stream that can exceed social security payments, especially when the number of properties owned increases. Also, real estate investments tend to appreciate over time, which can provide investors with significant capital gains, adding another layer of financial protection.
Most importantly, rental income often adjusts with inflation because lease agreements are regularly updated to reflect current market rates. This helps an investor’s earnings to grow as the cost of living rises, which is something that adjustments to Social Security benefits rarely accomplishes.
Related Article: CPI Report Reveals Rising Rental Rates Defy Cooling Inflation Trends
While social security benefits can provide a basic level of support, the limited funds provided often fall short of covering all expenses, especially during periods of high inflation. Because real estate investments offer immediate monthly income, long-term financial growth, and stability, it’s a significantly stronger safety net for those aiming for a secure and comfortable retirement.
Work with a Full-Service Investment Company that Can Quickly Add a Property to Your Portfolio
At Morris Invest, our mission is to help you build wealth through rental real estate. We can easily make this happen because we specialize in offering new construction properties situated in top-performing rental markets across the country. Our investments are designed to deliver 18+% IRRs with a positive cash flow, complete with built-in financing and substantial tax benefits.
Related Article: Maximize Cash Flow by Investing in Rental Properties that Deliver Substantial Returns
The best part is that we manage every detail, from tenant placement to property management. If you’re ready to explore high-return rental real estate opportunities, feel free to schedule a complimentary 30-minute consultation. In the meantime, check out our Morris Invest & SDIRA Program Overview page, as well as our video below on the following topic – The SHOCKING Truth about the Retirement CRISIS.
