Social Security is one of the fundamental pillars of the United States to keep retired people and those with disabilities away from poverty. Their payments are protected against inflation by the so-called Cost of Living Adjustment (COLA), a tool used by the Social Security Administration (SSA) so that retirees, spouses and more Americans do not lose purchasing power in the face of inflation.
According to statistics, Social Security offers an average of $23,000 a year as a benefit per covered person, although you can get more depending on your work history and the amount of money you have contributed during the best 35 years of income and contributions in Social Security taxes.
While it is true that it is possible to retire on your retirement income alone, this varies depending on the cost of living where you live and your living standards, and may not be the most desirable option.
Can I Live on Social Security Alone in 2024?
Many people wonder if it is possible to cover all the expenses of the cost of living only with retirement income. This year, the average monthly benefit is $1,915, which may be enough for some but insufficient for others.
Social Security is not designed to replace all of your income as a worker; in fact, it only replaces about 40% of your pre-retirement income. Although the 80% rule is generally used by financial planners.
However, and we have to emphasize this once again, your actual need for income may vary depending on personal circumstances and financial decisions.
The Social Security benefit varies depending on the starting age and the average income during your working career. Some people could earn up to $4,873 a month by maximizing their taxable income and waiting until age 70 to claim benefits. That is the maximum amount available in 2024 and could increase next year if the COLA is significant accompanying rising inflation.
How Much will Social Security Benefits Increase in 2025?
As I mentioned before, Social Security makes an adjustment called COLA based on the Consumer Price Index for Urban Workers and Administrative Employees (CPI-W). Each year, the SSA compares the CPI-W average for the third quarter of the current year with the same indicator for the previous year. If there is an increase, that percentage becomes the COLA for the following year. If there is no percentage change, there will be no increase that year.
In 2024, the COLA adjustment was 3.2%, which resulted in an increase in benefits of the same percentage for beneficiaries of all Social Security programs.
The amount of the increase in your Social Security benefit will depend on your current monthly benefit. For example, if your current monthly benefit is $1,000, a 3.2% COLA would increase your benefit to $1,032.
The Senior Citizens League estimates that by 2025, the COLA adjustment will be 2.66%, a significantly lower number than last year but much higher than the first estimates that were made in the first months of 2024. The final COLA will be announced in October 2024, and will impact millions of beneficiaries in the US.
