Picture a retired teacher in Eau Claire opening her May pension statement. One line shows her Core annuity rose 2.1%. Another line, her Variable annuity, jumped 18%. Same pension system, same envelope, wildly different numbers. Her first instinct: finally, room in the budget for a bathroom remodel and that Norway trip her sister keeps mentioning.
Here is the catch. The two increases do not carry the same promise, and neither works exactly like a Social Security cost-of-living adjustment (COLA). The Core side is steadier and protected by a floor. The Variable increase is a market tailwind wearing a pension costume, and it can blow the other direction next year. Understanding what each raise actually is makes all the difference.
Two Raises, Two Very Different Animals
The Wisconsin Retirement System, run by the state’s Department of Employee Trust Funds, splits many retirees’ benefits into a Core annuity and an optional Variable annuity. The Core side is smoothed. Investment gains and losses are spread across five years, which is why the 2.1% Core adjustment effective with the May 1, 2026 payment looks modest even after strong markets. That smoothing exists so retirees are not whipsawed by any single year.
But smoothed does not mean permanent. Core payments can move up or down each year based on investment performance, although they cannot fall below the original Core annuity set at retirement.
The Variable side is all-stock, and its annual adjustment reflects that portfolio’s performance without smoothing. The Variable Fund returned 22% in 2025, producing the 18% increase this May. The critical detail from Wisconsin ETF: Variable annuity adjustments can increase or decrease with investment performance, with no limit on the size of the change. A future year of losses can pull that check back down, even below its original amount.
Why Social Security Is the Cleaner Comparison
Social Security offers a useful contrast. Its cost-of-living adjustment is set by federal law, tied to CPI-W inflation, and cannot drop in nominal terms. If inflation is negative, there is no COLA, but the gross benefit stays flat. The 2026 Social Security COLA of 2.8% is now baked into future benefit calculations. Next year’s COLA builds on top of it. On a $2,000 monthly benefit, that raise adds roughly $56 a month, or $672 a year.
The Variable raise does not work that way. An 18% bump can be followed by a cut large enough to erase it. Social Security’s floor is the law. The Variable annuity’s floor is whatever the market decides.
Spending the Right Raise
Treat the Social Security COLA as recurring income. Treat the Core adjustment as steadier, but still subject to an annual review. Treat the Variable raise the way you would treat a good year in a brokerage account. It is real money, but it belongs in the flexible bucket, not the fixed-bills bucket.
A pension increase feels like a raise. WRS calls it an annual adjustment for a reason.
One more wrinkle: once a retiree cancels Variable Fund participation, ETF says that decision cannot be reversed. That door only swings one way, so it is not a decision to make in a single afternoon.
What to Actually Do With the Windfall
The mistake hardest to undo is lifestyle creep funded by a variable raise. Committing to a new car payment or a bigger cable package based on this year’s 18% is exactly how retirees find themselves cutting back later, when the Variable adjustment reverses. A one-time home repair paid from the bump is very different from a recurring obligation.
The same test applies to any pension anywhere. Is the raise a guaranteed COLA, an investment-linked adjustment, or something the plan could reverse next year? The label “pension increase” hides three very different promises. Your Social Security COLA is the sturdiest. Everything else deserves a second look before it becomes part of the grocery budget. Run the specifics past someone who knows your full picture before locking anything in.
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