Inflation is the sort of thing that tends to creep up on people — at least most of the time. In recent years, it’s been in everyone’s face — and has made it very difficult for working Americans and retirees alike to keep up with their bills.

Thankfully, Social Security benefits, which many retirees rely on, are protected from inflation to some degree. That’s because those benefits are eligible for an annual cost-of-living adjustment, or COLA.

But data from The Senior Citizens League, an advocacy group, highlights what a poor job those COLAs have done through the years. Between 2010 and 2024, seniors on Social Security lost 20% of their buying power due to COLAs failing to actually keep up with rising costs as they relate to retirees.

It’s for this reason that advocates are pushing for changes to the way Social Security COLAs are calculated. But even if those changes come to be, it doesn’t mean that retiring on Social Security alone will be a good idea.

A more targeted measure

The current index Social Security COLAs are based on is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The problem is that the CPI-W does not do a good job of capturing the costs retirees face.

Put another way, the spending patterns of seniors on Social Security are apt to differ from those of people who are still working. And also, it’s not a given that Social Security recipients live in urban areas, and the CPI-W specifically focuses on urban wage earners. So all told, there’s a huge disconnect.

That’s why advocates have been pushing to base Social Security COLAs on the Consumer Price Index for the Elderly instead. That index would likely place more weight on spending categories like healthcare that are a huge expense for seniors in particular. If lawmakers agree to this change, it could result in more generous COLAs in future years.

Social Security won’t be enough, even with better COLAs

Larger COLAs could be a boon to retirees on Social Security. But even if lawmakers implement this change, it won’t suddenly make it a good idea to retire on Social Security alone.

The reality is that if you earn an average wage, Social Security will probably replace about 40% of it, assuming that benefit cuts don’t happen. But most retirees can’t live very well on a 60% pay cut. So even if changes occur that lead to more generous COLAs, it’s still important to have adequate savings so you can supplement your monthly Social Security checks.

To that end, aim to start funding an IRA or 401(k) plan as early on in your career as you can, and invest that money so it’s able to grow. If you’re not sure what investments to choose, you can consult a financial advisor.

If you’re not interested in hiring a financial advisor, you can always fall back on an S&P 500 index fund. This effectively allows you to invest your retirement savings in the broad stock market. It’s a great way to take the guesswork out of investing while making sure your portfolio is diversified.

A new, senior-specific formula for calculating Social Security COLAs could be a very good thing for retirees and lead to yearly raises that actually allow recipients to keep up with inflation. But that won’t change the fact that those benefits were never designed to replace workers’ paychecks in full. And you shouldn’t make the mistake of thinking you’ll be just fine on Social Security alone in retirement when in reality, that’s likely to lead to a world of financial stress and heartache.

Since starting Financial Samurai in 2009, I’ve encouraged folks to keep an open mind and embrace as many different perspectives as possible. So often, we get set in our ways and think our approach is the only right way to do things. But I can assure you, you’re probably missing something—or could do something a little better—that could significantly improve your wealth or quality of life.

One different perspective I recently shared is how the richest people in the world are not index fund fanatics. I think this viewpoint is important because it helps wealth builders expand their minds to what’s possible. Yes, simplicity sells because it’s easy. However, if you want to break free from the herd, you’ve got to take more calculated risks.

Another perspective I offered was highlighting the value of paying someone to manage your money. I try to minimize fees as much as possible. But after managing a relative’s investment portfolios for a year, I absolutely see why fees are justified. Managing money for someone else can be incredibly stressful. I’ll never do it again for free.

In another post, I discussed how cultural differences may impede your chances of getting ahead in the workplace. If you’re part of the majority, you don’t have to spend as much energy assimilating or “sucking it up” to fit in and be liked. You just expect others to conform to you.

The Latest Shocking Perspective That Blew Me Away

While visiting my parents in Honolulu, I came upstairs and found my dad in his recliner watching Wimbledon. I glanced at the TV, which was showing Jannik Sinner vs. Grigor Dimitrov, and immediately asked, “What’s wrong?”

“What’s wrong with what?” he replied.

“Your TV,” I said. “It’s blurry.”

“I don’t know,” he shrugged. “Nothing’s wrong—except this horizontal line sometimes appears at the top.”

“What do you mean nothing’s wrong? It’s totally fuzzy!” I said.

“Oh really? I thought I just couldn’t see clearly anymore,” he answered.

He had gotten cataract surgery a couple years ago, which improved his vision. But he thought maybe it was declining again.

The Blurry 55″ TV My Parents Thought Was Normal

For a year and a half, my parents had been watching this blurry TV and blaming their eyesight instead of questioning the product. Zoom in closely: the name “Sinner” and the score are relatively clear in the top left, but his image is blurry. Even worse, the lower right-hand corner—where another match’s names and scores are displayed—is almost unreadable.

Watching tennis, with a tiny ball zipping across the screen, on this TV would’ve driven me nuts. I fiddled with the antenna just in case, but no improvement. I flipped through multiple channels over WiFI, same problem.

After just three minutes, it was obvious: the TV was failing, and they needed a new one. I couldn’t believe they had put up with this for so long, thinking they were the problem instead of the screen. I’ve seen this type of situation play out in marriages, but not with something as simple as a TV!

A New TV With A New Perspective

While I was already shopping for a new washer, dryer, and refrigerator for the in-law unit, I figured I might as well replace the old TV too. I hadn’t bought a TV in eight years and was blown away by how cheap prices had fallen. For just $650, I got them a 65″ Samsung, had the old one removed, the new one installed, and all their apps set up. It was $485 without the delivery and extra services that took more than an hour.

When the installers arrived, they confirmed the issue right away—the inverter was broken. That was a relief, honestly. A part of me had started questioning my own eyesight and worried that even with a new TV, things might still look blurry.

The clarity of the new TV was so much better. Given how many hours a day my parents watch TV, I’d argue this was the highest-impact quality-of-life improvement I gave them this trip. The second was fixing the drip in their kitchen ceiling that had been leaking for over three years!

But the real win wasn’t just a clearer picture, it was helping my parents realize that their vision wasn’t deteriorating at a rapid pace after all. I think as we age, we’re sometimes too quick to accept physical decline as inevitable. We stop questioning things and chalk up discomfort to “just getting old.”

This new TV helped restore not just visual clarity, but confidence.

Please Get a Different Perspective On Your Finances

I hope this story demonstrates how having a fresh set of eyes, literally, can dramatically improve your life. We often let inertia push us forward in the same direction, assuming what we’re doing must be fine. And if we have optimized our finances and lifestyle, great. But if we haven’t, the hidden costs can really compound to the point where we wonder where all our money went 10 years later.

It took me five years of underperformance in my son’s 529 plan before I finally shifted a greater asset allocation toward the S&P 500. With an 18-year time horizon, it made no sense for him to be in a target-date fund with a significant bond allocation. That’s not how I would invest my own money over that duration, as evidenced by my rollover IRA being 100% in equities since I left my job in 2012.

If only someone had reviewed the portfolio with me in 2017 and walked through the logic, his 529 would be over $100,000 larger today! The compounding effect of a suboptimal decision can become enormous over time. Ugh. Back then, I thought I was doing everything right—but I suppose it’s still better than not contributing at all.

When it comes to your finances, please seek out a different perspective. You are likely missing something that could cost you a fortune over time. Maybe it’s being stuck in a high-fee active fund that’s long past its prime. Maybe it’s choosing an expensive target-date fund over a cheaper index version. Or maybe it’s simply forgetting about the idle cash sitting in an old rollover IRA you haven’t touched in years.

Don’t wait 1.5 years watching a blurry financial picture before realizing something’s wrong. A clearer perspective could make all the difference.

Get a Free Financial Check-Up From Empower

If you have over $100,000 in investable assets—whether in taxable accounts, savings, 401(k)s, or IRAs—you can get a free financial analysis from an Empower financial advisor by signing up here. There’s no obligation, just an opportunity to have a seasoned professional review your finances with a fresh set of eyes.

Empower’s advisors build and analyze portfolios for a living. They may uncover hidden fees, inefficient allocations, or overlooked opportunities to optimize your financial plan. Even if you think everything is in great shape, getting a second opinion might help you spot what you’re not seeing—just like my parents with their TV.

The referral is brought to you by Financial Samurai, who has a partnership with Empower Advisory Group, LLC. You can read more about how it works here.

When it comes to your money and your future, don’t go it alone. One conversation could be worth tens or even hundreds of thousands of dollars over time.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is among the largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.

An anonymous caller feels trapped in a no-win situation with her financially reckless mother. She has the means to bail her out, but it doesn’t feel right. What should she do? 

Shannon is excited about investing in several companies overseas. But she can only access them using American Depository Receipts. What are they, and how do they work? 

Jennifer calls back with an update on putting a vacation on a credit card and playing the rewards game.

Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

Anonymous asks (at 01:27 minutes):  My mother has always lived beyond her means, and now it’s finally catching up to her. My sister and I are deeply concerned.

A couple of years ago, she and my stepdad bought a new house—a larger garage, pool, the works. We knew it was a stretch financially and told her so, but they went ahead anyway. Now they’re house-poor and looking to sell. 

Their marriage is also falling apart, and my mom wants a divorce. She’s in her mid-sixties and lives on $2,800 a month from Social Security and a small pension. Her husband doesn’t make much either. 

A one-bedroom apartment near my sister costs $2,000 a month. My mother has a car loan, medical bills, and less than $100,000 in combined savings between the two of them. The math just doesn’t work.

She doesn’t want to move or downsize further, but neither my sister nor I are in a position to have her move in with us. We live in high-cost-of-living areas, have kids, and are juggling our own financial priorities—saving for college, paying for activities, and building retirement. 

We’re both in strong financial positions thanks to years of hard work and frugal choices, but we don’t feel comfortable committing to giving her hundreds of dollars a month for decades.

Still… she’s our mom. So at some point, her crisis becomes our crisis.

How do we help a parent in a real financial bind when they’re unwilling to make the drastic lifestyle changes needed? Should we “meddle” now in hopes of reducing the long-term financial and emotional cost? 

Would buying a rental property for her to live in be a reasonable middle ground—something that helps her but allows us to build equity?

We’re trying to find a compassionate, realistic, and sustainable solution.

Shannon asks (at 26:58 minutes):  What do I need to know about investing in American Depository Receipts, or ADRs?

After a divorce nine years ago, I had to start over from scratch. Since then, I’ve built up $130,000—mostly in retirement accounts aligned with the Efficient Frontier—and I’ve set aside cash in a high-yield savings account for a home purchase in the next two to three years. 

I’m 39 now, debt-free, and on track for early retirement. Recently, I decided to carve out a small “fun fund” for individual stock picks—just 2 to 3 percent of my portfolio. 

I’ve found a few companies I’d love to invest in, but here’s the twist: they’re based in Finland and Switzerland, and aren’t primarily listed on U.S. exchanges. However, both offer ADRs that trade over the counter here in the U.S.

And… I have no idea what that means.

I’ve been listening to Afford Anything since 2020 (and went back to binge the archives), but I don’t recall hearing anything about ADRs. Can you shed some light on what they are, how they work, and what I should watch out for before investing?

Jennifer shares (at 38:01 minutes): I called in a couple of months ago to ask about potential downsides of putting my vacation expenses on a credit card and paying them off at a later time. I appreciate your insights, and to clarify, you had questioned whether I had the money to pay it back now.

 

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As always, The Motley Fool cannot and does not provide personalized investing or financial advice. This information is for informational and educational purposes only and is not a substitute for professional financial advice. Always seek the guidance of a qualified financial advisor for any questions regarding your personal financial situation. If you’d like to submit your question for feedback, you can do so here.

What would you do differently if you knew that you were going to be inheriting a lot of money? This is a question that a Reddit poster asked recently, after he discovered that he and his wife are going to be receiving millions when his parents pass away.

What do you wish you knew before inheriting potentially life changing $?
byu/Maleficent_Cut_4344 ininheritance

Since he wants to be ready for the inheritance that he knows is coming, he asked others who had already received a substantial financial gift what advice they might have or what they wish they knew in advance before the payment came. Fortunately, Reddit users came through with some helpful suggestions.

Finding out that a big inheritance is coming can be life-changing

The Redditor who started the thread explained that he and his wife are both in their 50s. His parents, who are in their 70s, informed him that they will be leaving him 45% of their $5 million estate, including $3 million in retirement accounts, $500,000 in savings, and a $1.5 million home.

The original poster (OP) and his wife have already been budgeting and saving, and they were anticipating retiring in seven years when they hit their own target retirement account balance. Their medical needs will also be taken care of by an employer when they retire early, which he described as a nice bonus since he doesn’t have to pay for individual insurance coverage.

So, now he’s trying to figure out what to do. He said he thinks they may spend around 10% of the inheritance in the first few years after receiving it, then leave 90% of the money behind to build generational wealth for his kids. But he wants to know what others who had received a big sum would do to see if his plan would work, if there are steps he should be taking now, or if they would do anything differently.

Should you make plans in advance for a big inheritance?

A number of Reddit posters chimed in with a smart suggestion for the OP, advising him that he should talk with a professional about his situation. After all, $2.5 million is more money than most people will have in their lifetime, and unfortunately, a lot of people do end up spending an inheritance too quickly if they don’t know how to manage it. The OP has the potential to set up future generations with financial security if he makes the right choices, and a financial advisor could help him to do that.

That may be an especially good idea, as the OP has indicated that he and his wife plan to spend as much as 10% of the inheritance in the first few years. It’s a bit of a red flag that they are already planning on spending money that they won’t get potentially for some years, and a large amount of it, too. Once they start spending, they may get used to living that lavish lifestyle, and it may be hard to cut back. Or they may make commitments and make expensive purchases, like a big new house, that come with ongoing costs.

Other posters also shared concerns about the potential for the OP to squander the inheritance, so they suggested making a careful and detailed budget to ensure that the money doesn’t end up simply slipping through the poster’s fingers. Focusing on long-term growth strategies and spending a small amount at a time, at a safe withdrawal rate, could allow the OP to make the most of the inheritance both for himself and for his kids, rather than just jumping into spending 10% of the money right away in the first couple of years.

The reality is that $2.5 million, and potentially more if the money grows, can make a big difference — but only if the money is truly used wisely. So the OP needs to think carefully about what his goals are for the funds and make a plan to achieve them.

My desire with each Weekend Reads is to provide you with articles and posts that encourage simplicity and minimalist living. Below, you will find links to blog posts and news stories that I hand-picked over the last couple weeks. I hope you find inspiration and practical help inside them.

That is my goal on Becoming Minimalist: to intentionally promote simplicity in a world that needs to hear it.

Finding Calm in Complexity | Linkedin by Robert Waldinger. A simple mind shift allows us to come home to ourselves, even briefly, throughout our busy days.

The American dream is no longer buying a house—it’s paying off debt | AOL by Sydney Lake. About one-third of Gen Zers say they’re financially underwater due to inflation, high interest rates, and stagnant wages.

25 Things I Won’t Be Purchasing in 2025 (to Save Money & Avoid Clutter) | The Simplicity Habit by Julianna Poplin. To avoid overspending and prevent clutter from coming into your home, it takes thought, planning, and intentionality.

From Comparison to Contentment | No Sidebar by Heather Spiva. When we compare what we have to what others have and what we think we should have, it pushes us into an emotional downward spiral. And it’s brutal.

10 Tiny Money Habits That Will Change Your Life in a Year or Less | Simple Money by Richard James. Small leaks sink big ships.

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15 Places to Apply the Pareto Principle to Help Minimize | YouTube by Joshua Becker. As soon I heard the Pareto principle, it felt like a lightbulb moment. I began noticing it everywhere. Soon, it was about more than numbers and statistics (or even the exact percentages.) It became a new lens through which to see my excess possessions. 

The Most Important Home Buying Advice You’ll Ever Hear | YouTube by Joshua Becker. Buying a home is a very personal decision that weighs a large number of factors. And only you know all the variables for making that decision. But too often, the most important piece of home buying advice we need is the one we never hear.