The Raise That Isn't a Raise: Why Social Security's COLA Can't Be Your Retirement Plan

You hear it all the time. Or maybe I just heard it a lot early in my advisory career, back when I was knocking on doors at Edward Jones. “I don’t need a financial advisor. I have Social Security coming in.” Or, my personal favorite: “I’m living the dream, and all I have coming in is Social Security.”

These days, I’m at Raymond James, but those conversations have stuck with me. And they always bring me back to the same question:

Is your Social Security check supporting the retirement you actually want? Or just the retirement you can afford?

Listen, if your bills are paid and you’re genuinely living the retirement you want, more power to you. But there’s a difference between choosing a simple retirement and having no financial room for anything else. If Social Security is your entire retirement plan, what happens when that check isn’t enough?

The good news: Your check is getting bigger

On October 14, the Social Security Administration announced a 3.6% cost-of-living adjustment, or COLA, for 2027. For the average retired worker, that means roughly $75 more per month starting in January, or about $900 more over the year.

Good news? Absolutely. A reason to stop planning? Not even close. Your groceries still need to be purchased. Your property taxes still need to be paid. Your insurance premiums, utilities, and home repairs aren’t going away. That extra $75 doesn’t arrive without a job to do. Odds are, your budget already has somewhere for it to go.

And that’s the point. A cost-of-living adjustment is meant to help your benefits keep pace with rising prices. It isn’t an emergency fund. It doesn’t build an investment account. And it isn’t a plan for everything retirement might throw at you.

Your expenses don’t care what your COLA is

Social Security’s annual adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. But your household doesn’t run on an inflation index. It runs on actual bills.

Maybe your mortgage is paid off. Great! Your property taxes aren’t. Maybe your car is paid off, but that doesn’t mean it will run forever. And your house? At some point, something is going to need fixing. The roof, the furnace, the water heater… Those things don’t check your Social Security balance before they break.

Then there are the things you actually want to do: visit your grandchildren, take a trip, help a family member, or simply enjoy the time you spent decades working toward. Where does that money come from? If the answer is, “Whatever is left over from Social Security,” that’s a pretty important number to know before you retire, right?

A bigger check doesn’t necessarily solve the problem

The average retired worker’s monthly benefit is expected to increase from approximately $2,095 to $2,170 in 2027. That increase helps. I’m not saying it does not. But if your income wasn’t covering your expenses before, a COLA doesn’t miraculously close the gap.

And if you’re spending everything that comes in each month, where is the cushion? Where’s the money for an unexpected repair? What happens when an expense comes along that can’t wait until next month’s check?

There’s a difference between having enough income to get through a normal month and having enough financial flexibility to get through an abnormal one. Your retirement plan needs to account for both.

Social Security is a foundation. It isn’t the entire house.

I’m not arguing that Social Security doesn’t matter. It does. But I am challenging the idea that “I have Social Security coming in” means “I have retirement figured out.” Those are not the same statement.

Social Security gives you an income source. A retirement plan helps you figure out whether that income combined with your savings, investments, pension, or other resources is enough to support your life. Not somebody else’s life. Yours.

That means answering some straightforward questions.

1. What will your monthly expenses actually look like?
2. When should you claim Social Security?
3. How much income will you need beyond your benefit, and where will that additional income come from?
4. What happens when something expensive and unexpected shows up?
5. And what are you willing to change if the numbers don’t work?

You don’t need to be wealthy to answer those questions, but you do need to be honest about the answers. If your expected expenses are higher than your expected income, relying on Social Security alone isn’t a sustainable strategy. Something must change: your income, your spending, your retirement timeline, or some combination of the three. Hoping the next COLA will take care of it isn’t a plan.

What does “living the dream” actually mean to you?

If your dream retirement is simple, that’s fine. There’s nothing wrong with living below your means. But living below your means by choice is one thing. Having no room to do anything else is another.

Maybe you want to travel. Maybe you want more time with your grandchildren. Maybe you just want to replace the furnace without wondering which bills will have to wait. That isn’t extravagant. It’s wanting some breathing room, and that breathing room deserves a plan.

Don’t wait until the paychecks stop to find out whether the numbers work. Look at what you expect to receive from Social Security. Look at what your life will cost. Then figure out where the difference will come from.

If you haven’t connected those pieces yet, let’s talk about building a retirement income plan around your benefits, savings, investments, and goals. Because “I have Social Security coming in” tells me where some of your income will come from. It doesn’t tell me whether it will be enough.

Here’s to planning well and living fully.

—Tyler