The Phone Call That Changed How I Talk About Retirement
Last March, a client I’ll call Patricia — a 68-year-old retired teacher from outside Atlanta — called my office in a mild panic. She’d just done something she told herself she’d never do: she withdrew $14,000 from her IRA to cover three months of expenses that her Social Security check and small pension couldn’t stretch to reach anymore. Grocery bills had crept up. Her Medicare supplement premium had jumped. Her property taxes rose again. None of it was dramatic on its own, but together, those increases had quietly eaten through her monthly cushion.
“Robert, I did the math,” she told me. “At this rate, I’ll be out of savings by 73.”
Patricia’s story isn’t unusual. In my 20 years as a CPA and Enrolled Agent working primarily with retirees, I’ve heard versions of this conversation dozens of times — and the frequency has accelerated sharply since 2022. What I see most often is not reckless spending or poor planning. It’s the slow, grinding pressure of costs rising faster than income, forcing disciplined people to tap savings years ahead of schedule.
A recent survey from the Employee Benefit Research Institute found that 33% of retirees are now less confident about having enough money to live comfortably throughout retirement compared to just a year ago. And according to a 2025 report by the National Council on Aging, nearly 40% of older adults said they had drawn down retirement savings faster than expected due to inflation. These aren’t abstract numbers — they represent real people like Patricia, and possibly like you.
Why Retirees Are Depleting Savings Earlier Than Expected
Let me be direct about what’s driving this. The Consumer Price Index may have cooled from its 2022 peak of 9.1%, but the cumulative damage hasn’t reversed. Prices didn’t go back down — they just stopped climbing as fast. Between January 2020 and June 2025, overall consumer prices rose roughly 23%. For retirees, certain categories hit even harder.
The Categories That Hurt Retirees Most
Food at home is up over 25% since 2020. Homeowner’s insurance premiums have surged 30-50% in many states. Healthcare out-of-pocket costs continue climbing at 5-7% annually, outpacing general inflation. And here’s the painful part: Social Security cost-of-living adjustments, while helpful, haven’t fully kept pace with these compounding increases.
I often tell my clients that inflation is like termites — you don’t notice the damage until the floor feels soft underfoot. A 2.5% COLA sounds reasonable until you realize your actual spending increased 4-5%. That gap, year after year, is why retirees are depleting savings earlier than anyone projected.
For a deeper look at how inflation specifically erodes retirement purchasing power, I broke this down with real numbers in my Inflation Cutting Into Retirement Savings: A CPA’s Analysis.
| Year | Social Security COLA | Actual CPI-W Inflation | Cumulative Gap (Lost Purchasing Power) |
|---|---|---|---|
| 2020 | 1.6% | 1.2% | +0.4% (COLA ahead) |
| 2021 | 1.3% | 4.7% | -3.0% |
| 2022 | 5.9% | 8.0% | -5.1% |
| 2023 | 8.7% | 3.2% | +0.4% |
| 2024 | 3.2% | 2.9% | +0.7% |
| 2025 | 2.5% | ~3.0% (est.) | +0.2% |
| Sources: Social Security Administration, Bureau of Labor Statistics. Note: CPI-W is the index used for COLA calculations. The cumulative gap reflects compounding — even years where COLA “caught up” didn’t erase prior losses in real purchasing power. | |||
The table tells the story clearly. That brutal 2021-2022 stretch — when inflation spiked but the COLA lagged by a year — created a real purchasing power hole that many retirees are still climbing out of. The 8.7% COLA in 2023 helped, but it arrived after the damage was done.
Patricia’s Recovery Plan: A Real-World Approach
Back to Patricia. After that phone call, we sat down and built what I call a “retirement triage plan.” Not a fantasy spreadsheet — a realistic, month-by-month strategy to slow the bleed from her savings while protecting her quality of life. Here’s what we did, and what I think can help others in similar situations.
Step One: The Honest Income Audit
The first thing I had Patricia do was list every dollar coming in — not what she thought was coming in, but the actual deposits. Social Security: $2,140/month. Teacher’s pension: $680/month. A tiny dividend from a mutual fund her late husband set up: about $45/month. Total: $2,865.
Then we listed every dollar going out. This is where most people get a shock. Patricia’s true monthly spending was $3,420 — a gap of $555 every single month, or $6,660 a year being pulled from savings. If you haven’t done this exercise recently, I’d strongly encourage you to read Retiree Income Sources Breakdown: Where Your Money Really Comes From and apply it to your own situation.
Step Two: Targeting the Three Biggest Leaks
In Patricia’s case — and this is remarkably consistent across my client base — three categories were consuming a disproportionate share of her budget:
- Healthcare costs: Her Medicare Part B premium ($185/month in 2025), Medigap Plan G ($198/month), Part D prescription plan ($42/month), plus copays and dental work not covered by Medicare added up to $580/month — over 20% of her income.
- Homeowner’s insurance: Her premium had jumped from $1,400/year in 2021 to $2,250 in 2025. She hadn’t shopped for a new policy in four years.
- Groceries and household: She was spending $640/month, up from about $480 three years prior, without buying anything differently.
We attacked each one. Patricia switched from her Medigap Plan G to a Medicare Advantage plan through Medicare.gov that offered $0 premium and lower copays, saving her roughly $190/month — though I was careful to explain the tradeoffs, particularly narrower provider networks. We shopped her homeowner’s insurance and saved $380/year by bundling with a different carrier. And she started using a senior grocery discount program at her local Publix that cut her food bill by about 8%.
Total savings from these three moves: roughly $3,400/year — cutting her annual savings drain nearly in half.
The COLA Question: What 2027 Might — and Might Not — Do for You
One question I’m getting constantly right now: “Will next year’s COLA help?” Early projections for the 2027 Social Security COLA suggest it could land somewhere between 2.0% and 2.5%, potentially lower than the 2.5% adjustment retirees received in 2025. The Social Security Administration won’t finalize the number until October 2026, based on third-quarter CPI-W data, but the trajectory of inflation in mid-2025 suggests modest adjustments ahead.
Here’s what concerns me as a tax professional: even a modest COLA can push some retirees into higher tax brackets or trigger taxation of Social Security benefits they weren’t paying before. If your combined income (adjusted gross income + nontaxable interest + half your Social Security) exceeds $25,000 for single filers or $32,000 for married filing jointly, up to 50% of your benefits become taxable. Push past $34,000 single or $44,000 married, and up to 85% is taxable. Those thresholds, set in 1993, have never been adjusted for inflation. I covered this tax trap in detail in 2027 Social Security COLA Could Trigger New Taxes for Seniors.
A COLA increase can literally cost you money if you’re near those thresholds. I’ve seen it happen to clients — a $45/month raise from Social Security that triggered $600 in additional federal taxes. You have to plan for this.
What I Tell Clients Who Feel Like They’re Falling Behind
There’s a psychological weight to watching your savings balance decline. I’ve seen confident, capable people become paralyzed by anxiety about running out of money. So let me share what I’ve learned works — not just financially, but emotionally.
Separate Your Money Into Buckets
One strategy that brings enormous peace of mind is what I call the “three-bucket” approach. You don’t need a financial advisor charging 1% of assets to implement this:
- Bucket 1 — Immediate (0-2 years): Keep 18-24 months of living expenses in a high-yield savings account or short-term CDs. Right now, you can still find FDIC-insured accounts paying 4.0-4.5% APY. This is your “sleep at night” money.
- Bucket 2 — Bridge (3-7 years): Treasury bonds, bond funds, or conservative balanced funds. According to Investopedia, Treasury I-bonds and TIPS remain solid options for inflation protection. The goal is modest growth with low volatility.
- Bucket 3 — Growth (8+ years): Even at 65 or 70, you likely have a 20-30 year time horizon. A portion of your portfolio in diversified stock index funds gives you the growth needed to outpace inflation long-term.
When Patricia could see that her immediate two years were fully funded and untouchable, her anxiety dropped dramatically — even though the total dollar amount hadn’t changed. Structure creates calm.
Don’t Ignore Income You May Be Leaving on the Table
In my practice, I regularly discover that retirees are missing income sources or benefits they’re entitled to. Some common ones:
- Medicare Savings Programs: If your monthly income is under $1,715 (single) or $2,320 (married) in 2025, you may qualify for help paying Part B premiums, deductibles, and copays. Many eligible seniors never apply.
- Property tax exemptions: Most states offer senior homestead exemptions that can reduce property taxes by $500-$2,000+ annually. You typically must apply — they aren’t automatic.
- Qualified charitable distributions: If you’re 70½ or older and donating to charity, a QCD from your IRA satisfies your required minimum distribution without increasing your taxable income. For clients near those Social Security taxation thresholds I mentioned, this is a powerful tool.
- SNAP benefits: There’s a persistent stigma, but seniors with limited income are eligible, and the average benefit provides meaningful grocery relief.
The Bigger Picture: Is the Situation Really As Dire As Headlines Suggest?
I want to be honest here because I think the media narrative can be both helpful and harmful. Yes, retirees are depleting savings faster than planned. The data supports that clearly. But I’ve also seen something the surveys don’t always capture: retirees are remarkably adaptive when given the right information.
Patricia? Six months after our initial triage session, her monthly gap had shrunk from $555 to $180. She picked up a part-time seasonal job doing tax prep through a volunteer program — something she actually enjoys — that brings in about $3,000 during tax season. Her savings withdrawal rate dropped from 6.6% to under 2%. At that pace, her nest egg will likely last well into her mid-80s, even with conservative growth assumptions.
She didn’t need a miracle. She needed a plan, current information, and someone to help her see options she’d overlooked.
Five Things to Do This Month if You’re Worried About Your Savings
If Patricia’s story resonates with you, here are the moves I’d prioritize right now:
- Run an honest income-vs-expense audit. Use your bank statements from the last 90 days, not estimates. The gap between what people think they spend and what they actually spend averages 20-30% in my experience.
- Review your Medicare coverage during Open Enrollment (October 15 – December 7). Plans change every year. What was the best deal in 2024 may not be in 2026. Even outside enrollment, check if you qualify for Medicare Savings Programs.
- Shop your insurance. Homeowner’s, auto, and supplemental insurance premiums have surged, but competition is fierce. Get at least three quotes.
- Check your Social Security statement. Log into my Social Security at ssa.gov and verify your earnings record. Errors happen, and they directly affect your benefit amount.
- Talk to a tax professional about your 2025 withholding. If your income has changed — even modestly from a COLA — your tax situation may have shifted. A $200 consultation now can prevent a $1,500 surprise in April.
For a broader look at the financial challenges facing retirees right now and concrete solutions for each one, I’d recommend reading 5 Biggest Financial Concerns for Retirees (And How to Fix Them).
The Bottom Line From Someone Who Does This Every Day
Retirees depleting savings early is a real and growing problem — but it is not an inevitable one. The combination of sticky inflation, modest COLAs, rising healthcare costs, and stagnant tax thresholds has created a uniquely challenging environment for people on fixed incomes. I won’t sugarcoat that.
But in 20 years of sitting across the table from retirees, I’ve learned that the ones who fare best aren’t necessarily the ones who saved the most. They’re the ones who stay engaged, ask questions, review their numbers at least twice a year, and refuse to let anxiety replace action.
Patricia calls me every quarter now. Last time, she told me she’d started volunteering at her local library’s financial literacy program, helping other seniors navigate exactly the challenges she faced. “I figured if I could learn this at 68,” she said, “anyone can.”
I couldn’t agree more.
About Robert Thompson, CPA, EA (Enrolled Agent)
Robert Thompson is a Certified Public Accountant and IRS Enrolled Agent with over 20 years of experience specializing in retirement tax planning. He has helped thousands of American retirees navigate the tax implications of Social Security benefits, required minimum distributions, 401(k) and IRA withdrawals, and estate planning. At Daily Trends Now, Robert breaks down complex tax rules into clear, actionable strategies that help seniors keep more of their hard-earned money.
