Retirees are likely to receive some bad news on Thursday when the government announces the Social Security cost-of-living adjustment (COLA) for 2025. Analysts have predicted a far lower COLA for next year than in recent years, and retirees could face less financial stability as a result, experts say.

The most recent estimate from The Senior Citizens League showed the COLA likely to be at a four-year low of 2.5 percent. This figure would represent a significant drop from the 3.2 percent increase retirees received in 2024.

While the COLA is designed to help Social Security recipients keep pace with inflation and rising living costs, many seniors are concerned that the 2.5 percent increase will not be enough to cover their expenses.

Why the Lower COLA Increase?

The lower COLA increase is a reflection of the recent cooling of inflation. However, many seniors are still struggling with the high cost of living, particularly for essentials like food and healthcare.

"While we have seen inflation cool over the past year, many consumers aren't seeing the difference in their wallets. Retirees, in particular, may still be grappling with the increased cost of living if their retirement savings is keeping pace with inflation," Elizabeth Ayoola, a NerdWallet personal finance and retirement expert, told Newsweek.

The Impact on Retirees

The impact of the lower COLA increase will vary depending on individual circumstances. However, it is likely to be most acutely felt by those on lower incomes.

Many seniors will likely find a 2.5 percent to be limited compared to the COLA from the past three years, but it's still a larger boost than average. "It's in line with our economic reality at the moment, as inflation does seem to finally be cooling, which will affect the year-over-year increase in benefits we will see from government programs moving forward," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.

The Need for Careful Budgeting

While any uptick in benefits would be welcome, seniors would need to carefully budget what they're receiving, especially as many will see higher prices at the grocery store and on health care, Beene said. "Just because inflation is cooling doesn't mean prices are necessarily dropping, but rather that they're no longer increasing," Beene said. "Seniors have to make the best use of the benefits, even if they'll have a tad more in their check next year."

The Long-Term Implications

The lower COLA increase is a sign that the Social Security system is facing increasing pressure. The program is projected to become insolvent in the coming decades, meaning it will not be able to pay out full benefits.

The 2025 COLA increase highlights the need for reforms to the Social Security system. Policymakers must address the long-term financial challenges facing the program to ensure that future generations of seniors have access to the benefits they have earned.

A Bleak Outlook

All in all, seniors will likely earn an extra $48 more each month, which might do little to address many recipients' economic realities.

"Sure, overall inflation's cooling down, which sounds good on paper," Michael Ryan, a finance expert and the founder of michaelryanmoney.com, told Newsweek. "But here's the problem, and I see this with people every single day: Senior costs aren't following the same pattern."

For many, rent, medical bills, and groceries still are skyrocketing past the levels of previous years. "I've been doing this long enough to know that Social Security was never meant to be someone's only income in retirement," Ryan added. "But that's exactly what it's become for too many people. "

A Call to Action

The lower COLA increase is a wake-up call for both seniors and policymakers. It is a reminder that the Social Security system is facing significant challenges.

It is essential for seniors to plan carefully for their financial futures, and for policymakers to take action to ensure the long-term sustainability of the Social Security system.

What You Can Do

• Review your budget. Make sure you are spending your money wisely and identifying areas where you can save.

• Consider working longer.

• Explore other sources of income. This could include part-time work, investments, or a reverse mortgage.

• Stay informed about Social Security. The Social Security Administration provides a wealth of resources to help you understand your benefits and plan for the future.

The Future of Social Security

The future of Social Security is uncertain. However, by taking steps to plan for your financial future and advocating for reforms to the system, you can help ensure that Social Security remains a vital safety net for generations to come.