If it weren't for Social Security, millions of older Americans would no doubt struggle to keep up with their ongoing expenses. That's what makes Social Security's cost-of-living adjustments (COLAs) so important.

A good rule of thumb to figure out your retirement savings needs is to come up with an annual income you expect to need, subtract your annual Social Security benefit, and then multiply the remaining number by 25.

The most direct and obvious effect of the new COLA is the increase in monthly benefits. If your monthly Social Security benefit is $1,000 this year, it will be $1,025 starting in January 2025. If it's $2,000 now, it'll be $2,050.