• As inflation comes down, retirees will likely see lower Social Security cost-of-living adjustments.
• To prepare for smaller increases to their monthly checks, there are steps retirees can take to protect their income now.

High inflation has prompted higher Social Security cost-of-living adjustments.

But as the rate of price growth subsides, the annual increases for Social Security may fall in 2025 and beyond, predicts Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League, a nonpartisan senior group.

In 2024, more than 66 million Americans are getting a 3.2% increase to their monthly Social Security checks. For retirees, the average increase is about $59 per month, according to The Senior Citizens League.

That adjustment is far lower than the 8.7% COLA beneficiaries saw in 2023 or the 5.9% boost in 2022, both of which were the highest in more than 40 years.

More from Personal Finance:
Why gas is so expensive in California
Credit card users face 'consequences' from falling behind
After Biden praises progress on inflation, economists weigh in

The benefit boost beneficiaries saw in 2024 is still above the 2.6% average over the past 20 years, according to The Senior Citizens League.

But that may be poised to change as the rate of inflation comes down.

Early estimates for the 2025 Social Security COLA

New government data points to a 2.4% Social Security COLA for 2025, The Senior Citizens League estimates, based on new government inflation data released this week.

That estimate is subject to change. The Social Security Administration typically announces the COLA for the following year in October.

The annual adjustment is calculated using third-quarter data from a subset of the consumer price index, the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. As of February, the CPI-W increased 3.1% over the past 12 months.

"This is way early," Johnson said. "It will change multiple times since the COLA is on the average inflation in the third quarter of the year against the previous year."

"A lot can happen between now and then," she said.

In the meantime, experts say there are steps retirees can take to help compensate for the prospect of lower benefit increases.

Make the most of your cash

While inflation is coming down, interest rates savers can earn on their cash are still the highest they've been in years.

For retirees who have extra money in their monthly budget, it can be helpful to set those sums aside to help prepare for unexpected expenses that may crop up later, Johnson said.

Online savings accounts are offering higher returns on cash. Certificates of deposit also provide a way to guarantee a certain return over a short- or long-term period even as interest rates come down.

With inflation still elevated, it also helps to limit fixed expenses, as well as try to find ways to cut and save, said Lisa Featherngill, a certified financial planner and director of wealth planning at Comerica Wealth Management in Winston-Salem, North Carolina.

"We highly suggest that people in retirement do an annual cash flow projection," Featherngill said.

That can help identify any difference between expected income and expenses.

To make up the difference, retirees may use investment income, if they have it, or find other ways of cutting spending or generating returns on their cash, she said.

Consider other sources of fixed income

For the average American, Social Security replaces about 40% of the income they received while working, said Kelly LaVigne, vice president of consumer insights at Allianz Life, which specializes in annuities and life insurance.

"You've got to get that other 60% from somewhere," LaVigne said.

It helps to invest your savings to grow for the future when you need to withdraw from that money, he said.

Annuities, which provide fixed income in retirement in exchange for a lump-sum investment, can be one way to supplement a retiree's income, LaVigne said.

Consult with a financial advisor

Before purchasing an annuity or other retirement income strategy, it helps to consult with a professional.

"Having a really good financial advisor is the first step," Featherngill said.

Many financial advisors are licensed to sell annuities. Ideally, they will not be dedicated to one company's products and can shop around to find the best deal for you, she said.

Importantly, they can also look at your overall financial situation to evaluate whether an annuity is the right decision for you, or whether other strategies may better help you in retirement.

"The most important thing when you're choosing a financial advisor is to choose someone who you're comfortable with," LaVigne said.

To accomplish that, it helps to talk to several professionals before selecting one.

"You have to interview them for the job," LaVigne said, and find someone whose style works for you.

Retirees who have lower incomes may be able to find more information from their local senior centers and other community resources, Johnson suggested.