Social Security is vital for most retirees. It delivers about 30% of income to those Americans aged 66 or older. Indeed, per the Social Security Administration (SSA): “Among Social Security beneficiaries aged 65 and older, 12% of men and 15% of women rely on Social Security for 90% or more of their income.”

One great thing about Social Security is that benefits are increased in most years, helping retirees keep up with inflation — via cost of living adjustments (COLAs). The latest COLA was just announced, and there wasn’t widespread rejoicing.

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The latest COLA — and what Americans think about it

The latest COLA, to take effect in 2025, was recently announced, and it’s… 2.5%. That’s very close to the 2.6% average annual hike over the past two decades. The table below lists some recent Social Security COLAs:

Source: Social Security Administration.

If you think that 2.5% isn’t much of an increase, you’re not alone. We at the Motley Fool surveyed a bunch of retirees and found that 54% viewed it as insufficient. In fact, fully 31% found it “completely insufficient.”

I understand the sentiment — because as of September, the average monthly retirement benefit was $1,922 — or only about $23,000 per year. That’s far from enough to support most of us in retirement. Increase it by 2.5% and it rises to only $23,641 — only about $577 more, and an increase of just $48 per month.

Even worse, COLAs are likely to disappoint many more times, unless they start getting tied to a more appropriate measure of inflation — the CPI-E, not the CPI-W. The CPI-W is meant to reflect the expenses of workers, while the CPI-E is meant to better reflect the spending of older folks. Thus, for example, it more heavily weights medical care — a category that has experienced higher-than-average cost increases.

How to plan for retirement without relying too much on Social Security

Of course, if you’ve earned more than average over your working life, you’ll likely collect bigger-than-average benefit checks. But they still are not likely to come close to providing all you need or want. So, what can you do to prepare for retirement?

One good strategy is to build multiple income streams for your retirement. Definitely be saving and investing for retirement — saving aggressively and investing effectively. Figure out how much you’ll need in retirement, and then figure out how you’ll amass it.

Here are some kinds of income streams you might have in retirement:

• Part-time work for the first few years of retirement.
• Social Security income.
• Income from dividend-paying stocks.
• Rent checks from properties you own and lease out.
• Income from one or more annuities.
• Pension income from job(s) you and/or your spouse had.
• Income from selling stocks in your portfolio whenever needed.
• Income from interest-bearing investments such as bonds, bank accounts, CDs, etc.
• Inheritances.

A little thinking outside the box can yield even more income possibilities, such as cashing out a life insurance policy, getting a reverse mortgage, taking in a boarder, and so on. Simply delaying your retirement by a few years can be a powerful move, keeping more dollars in your pocket.

However you go about it, it’s smart to be working toward funding most of your retirement on your own. Take some time to develop a good plan, and then execute it well. And don’t expect Social Security to provide most of your retirement income because it probably won’t — and you probably don’t want it to, either.

The $22,924 Social Security bonus most retirees completely overlook

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