The most important date of the year for pensioners will be next week

If Social Security Benefits If you make up a significant portion of your retirement income, it's worth keeping an eye on what's coming. Specifically that Cost of Living Adjustment (COLA) The level of purchasing power for the coming year will be announced on Thursday, October 10th. This adjustment is intended to help retirees keep their purchasing power in line with inflation. However, sometimes it may not be enough, which highlights the importance of planning for your entire financial situation in the coming year. Whether or not COLA is significant, retirees may need to consider certain strategies to ensure financial stability.

If you've been experiencing financial hardship lately, you're not alone. The Social Security Administration (SSA) increased average monthly benefits by 3.2% in January of this year, which is about $58 more per month. However, inflation continues to impact consumers. According to the Bureau of Labor Statistics, Costs have increased about 2% since the end of 2023, and for older adults – who often have higher medical costs – costs have increased about 3%. These additional costs can quickly add up for those on a tight budget.

What is positive is that the inflation rate corresponds relatively well with the expected increase COLA. Although the SSA does not officially predict this COLA, The senior league estimates an increase of 2.5% for 2025 Social Security Payments. Due to the recent slowdown in inflation, this forecast is slightly lower than previous estimates.

However, as a pensioner or prospective pensioner, you should not rely too much on the amount of this adjustment. Ideally, your income-producing investments should ensure that you are not solely dependent on them social security because it is important to remember social security was never intended to be the sole source of retirement income. With average payments just over $1,900 per month, most people need additional sources of income to live comfortably. This requires you to save and invest during your working years and make the most of those investments after retirement. How?

1. Protect yourself from further interest rate cuts on bonds to supplement your social security contributions

For retirees who rely on interest income from bonds, establishing a “bond ladder” is critical. This approach sets the maturity dates of fixed-income investments—such as U.S. Treasury bonds, CDs, or corporate bonds—so that they are spread out over several years. A properly constructed bond ladder reduces risk while helping to stabilize interest income over time.

The Federal Reserve has indicated plans to cut the federal funds rate by at least 100 basis points by next year, with smaller rate cuts possible later. Recent rate cuts, including a 50 basis point cut, have already led to a decline in interest rates on bonds and similar fixed income products, and further declines appear likely. Consider investing more heavily in higher-yielding bonds within your bond scale to take advantage of current interest rates before they fall further. However, be sure to maintain diversification to mitigate risks.

2. Check your dividend stocks

While higher-yielding stocks may seem attractive to retirees looking for income, they aren't always the best option. High dividend yields are often accompanied by minimal, if any, increases in distributions. For example, Kraft Heinz has a dividend yield of 4.5%, but the company has not increased its quarterly dividend of $0.40 per share since the beginning of 2020. This means investors could lose purchasing power over time.

3. Evaluate your expenses compared to your investment returns

Finally, calculate how much you will spend next year and determine whether your current investments can cover those expenses without depleting your savings. While it is important to hold the right mix of stocks and bonds, how they are divided is equally important. Consider whether you can meet both short-term and long-term financial needs by adjusting the ratio of stocks to bonds in your portfolio.

It's also a good idea to reevaluate your retirement budget. COLA Adjustments often cannot fully keep up with rising living costs, so adjustments to your expenses may be necessary. Assess whether all of your current expenses are essential. Are you using all the streaming subscriptions you pay for? Are there ways to lower car insurance premiums? Can you limit eating out? Over time, small savings add up, and thoughtful spending adjustments can contribute significantly to your overall financial health.