Living on Social Security alone is not optimal, nor is being in a position where most of your income comes from those monthly benefits. Unfortunately, that's the position a lot of seniors are in today. And that means annual Social Security cost-of-living adjustments, or COLAs, are extremely important.

COLAs allow Social Security beneficiaries to maintain their buying power as inflation drives the cost of living upward. Each year, benefits are eligible for an automatic COLA, which is calculated based on third-quarter inflation data.

Specifically, Social Security COLAs are determined based on fluctuations in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the months of July, August, and September. While July CPI-W data should become available soon, we'll have to wait longer on data for August and September.

But October 10 is when September's CPI-W reading should become available. From there, the Social Security Administration can announce an official COLA. But whether seniors wind up happy with that number is a different story.

Retirees should gear up for some bad news

The COLAs Social Security recipients have gotten in recent years have been fairly generous. In 2024, benefits rose by 3.2%. In 2023, they rose a whopping 8.7% following a period of rampant inflation in 2022.

But next year's COLA is shaping up to be a lot lower. We won't know how much lower until October.

Initial estimates are calling for a 2025 COLA of 2.63%. But based on how inflation has been trending, it's fair to say that number could slide.

Of course, even if 2025's Social Security COLA ends up being a bit higher than 2.63%, the reality is that it probably won't manage to keep pace with inflation. The reason? COLAs pretty much never do.

A recent Motley Fool survey of retirees found that 62% regard 2024's 3.2% COLA as insufficient. And 44% of respondents have considered going back to work because Social Security doesn't pay them enough to cover their expenses.

Aim to be less reliant on Social Security COLAs

Current retirees may have no choice but to hope for the best as far as next year's COLA goes. But if you're not yet retired, you have a prime opportunity to set yourself up to worry less about Social Security COLAs in the future -- namely, by saving more today.

The larger a nest egg you bring with you into retirement, the less reliant you'll be on Social Security as a whole. And even if you're well into your career, you can still play catch-up if you commit to mindful spending and prioritize contributions to your 401(k) or individual retirement account (IRA).

In fact, let's say you're 50 years old with nothing saved. If you spend the next 20 years socking away $500 a month and your portfolio delivers an average annual return of 8%, which is a bit below the stock market's average, you'll end up with a nest egg worth about $275,000. According to the Federal Reserve, that's more than the median $200,000 retirement savings balance among Americans aged 65 to 74 today.

Another way to become less reliant on Social Security COLAs in the future is to delay your benefits past full retirement age. If you're able to hold off until age 70, you can give your monthly checks a sizable boost. That way, even if the COLAs you get end up being stingy, you'll be starting with a much higher baseline.

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