Getting most or all of your income from Social Security in retirement isn't ideal. And the reason is that you're looking at a pretty significant pay cut if you don't have other income at your disposal.
If you earn an average salary, you can expect Social Security to take the place of about 40% of it in retirement. But most seniors need far more replacement income than that to be able to comfortably manage their bills.
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If Social Security is your primary or sole retirement income source, you may be heavily dependent on the program's cost-of-living adjustments (COLAs) to keep up with your bills from one year to the next. And during periods when COLAs are stingy, it can be especially difficult to make ends meet.
Such is the case for many people in 2025. In January, Social Security got its smallest COLA in several years, and benefits rose a mere 2.5%. Not surprisingly, a COLA that small has made it difficult to keep up with expenses.
But some positive news actually just emerged in the context of inflation. And it's especially good news for Social Security recipients.
Inflation is finally cooling
If you've been feeling like your 2.5% COLA isn't keeping up this year, relief may be in sight. In March, the Consumer Price Index, which measures changes in the cost of consumer goods and services, fell 0.2% on a monthly basis and rose only 2.4% on an annual basis. And if this trend continues, Social Security's 2.5% COLA could beat inflation in the coming months, giving beneficiaries some much-needed relief.
Of course, it is worth noting that cooling inflation also has the potential to lead to a smaller Social Security COLA in 2026. So what seniors gain in one regard, they might lose in another.
But here's the thing -- 2025's Social Security COLA is already set in stone. So if inflation levels continue to fall, it could work to retirees' benefit this year.
Try not to retire on Social Security alone
It's an unfortunate thing that so many seniors today rely on Social Security COLAs to keep up with their living costs. That can make for a very stressful situation if those COLAs aren't generous, or if they end up falling short based on how inflation trends.
That's why it's important to save for retirement if you're still working. Even if you don't manage to accumulate a multi-million-dollar nest egg, having some additional income to spend could make your senior years a lot less financially stressful.
Here are some tips for eking out retirement savings:
- Claim your full employer match in your workplace 401(k) plan
- Bank your raise every year from the start
- Boost your income with a side job and use those earnings to fund a retirement account
- Save and invest windfalls (like tax refunds) for retirement rather than spend them
Easing inflation is a good thing in general. And hopefully, it will be a source of relief for Social Security beneficiaries today.
But you don't want to spend your retirement tracking inflation data and worrying about every little rise. So your best bet is to save accordingly so you're able to manage your bills with less stress.
