To ensure that benefits keep up with inflation, the Social Security Administration (SSA) typically makes a cost of living adjustment (COLA) each year. For 2025, the SSA delivered 2.5% of Cola – and the increase in retiree benefits appears to be getting mixed reviews.
In a polling Of 2,000 retirees surveyed by The Motley Fool, 54% said a new car for this year was not enough. Breaking down the poll results a little further, 30% think this year’s Coke is completely insufficient and 24% think it’s somewhat insufficient.
Even if future taxes come in higher than this year’s level, stretching your Social Security benefits to cover expenses in retirement can be difficult. The good news is that there are steps you can take to reduce your reliance on Social Security and set yourself up for wealth in your golden years.
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While it may sound like an obvious or simple step to improving your finances, budgeting and sticking to it is a way to lay the groundwork to ensure you’re set up for a comfortable retirement. Even basic expenses can add up quickly, and a lack of oversight when it comes to discretionary spending can mean you’re cheering for less take-home pay than you bargained for.
Having a good understanding of your personal finances and living within those parameters will help ensure you are on the right track to a comfortable retirement. And while inflation for housing, food, and other essentials can make saving difficult, putting control over your financial future through budgeting can limit your exposure to price creep in other categories.
In addition to having a well-defined budget, it is a good idea to evaluate how well you stick to your plan and how much money you actually manage to save at regular intervals. It can also help you avoid lifestyle, which is a tendency that sees people increase their spending as their earnings rise. If you’re making more money but fan spending beyond the extra cash you’re bringing in, you could be sabotaging your plans for a rich retirement.
Once you’ve worked out your personal budget and adjusted as needed, you should have a good idea of how much extra money you’re bringing in each month. If you haven’t already emergency fundyou should make sure you have the money for one. With that important financial base covered, you can begin formulating your investment strategies.
Keeping some of the extra money you bring in each month in a savings account can be a good idea and help you earn some interest income, but there are other investment options that are far better for growing wealth over time. Of course, many of these other investment avenues also come with higher levels of risk and volatility. Because the value of stocks and other assets can fluctuate significantly even over a relatively short period of time, it’s best to keep it even and stick to a steady, predetermined investment schedule.
Situations will inevitably arise that shake your confidence and cause you to worry about the future, but sticking to a well-defined investment schedule can help you turn otherwise worrying times into periods of opportunity. For example, S&P 500 The index fell dramatically in 2008 in conjunction with the last major financial crisis and moved even lower in 2009. Things looked pretty bleak at the time, but you could invest in stocks at fantastic prices if you were steady and stuck to your investment schedule.
While it is possible to win big with riskier short-term investments, history shows that it pays to play the long game. If you prioritize investing in high-quality opportunities and take a long-term approach, you don’t have to take huge risks to secure life-changing returns.
Investment in Vanguard S&P 500 ETF(NYSEMKT: VOO)which is an exchange-traded fund that tracks the S&P 500 index, would give you a total return of roughly 95% over the past five years after factoring in the dividend. Over the last 10 years, it would have yielded a total return of around 255%.
In addition to investing in ETFs that track indexes or industries, you may also want to consider individual investments in blue-chip stocks, growth stocks, and dividend stocks backed by strong companies. Investing in real estate, bonds and other quality assets can help you further diversify your holdings and strengthen your overall financial base.
When it comes to setting up a wealthy retirement, it’s a marathon — not a sprint. But with a well-adjusted personal budget, a realistic investment schedule, and a commitment to building a diversified portfolio of high-quality assets, you can reduce your reliance on Social Security and set yourself up to live the good life.
If you’re like most Americans, you’re a few years (or more) behind on retirement. But a handful of little-known “Social Security secrets” could help you secure a boost to your retirement income. For example: One simple trick could pay you as much as $22,924 More … every year! Once you learn how to maximize your Social Security benefits, we think you could confidently retire with the peace of mind we all do afterward. Simply click here to discover how to learn more about these strategies.
Keith Noonan has no position in any of the mentioned stocks. The Motley Fool has positions in and recommends the Vanguard S&P 500 ETF. The Motley Fool has disclosure rules.
