Retirees Depleting Savings Faster: A CPA’s Inflation Analysis

A Startling Number That Should Concern Every Retiree

Here’s a finding that stopped me cold when I reviewed the latest data: 37% of retirees are now withdrawing from their savings faster than they planned, according to a 2025 Employee Benefit Research Institute survey. That’s not a slight uptick — it’s a structural shift in how American seniors are experiencing retirement, and it’s been accelerating since 2021.

In my 20 years as a CPA and Enrolled Agent working with retirees, I’ve watched withdrawal rates creep upward during inflationary periods before. But what’s different this time is the duration. We’re not talking about a one-year shock. Cumulative inflation from January 2020 through May 2025 has exceeded 22%, according to Bureau of Labor Statistics CPI data. That means a retiree who needed $50,000 annually in 2020 now needs roughly $61,000 to maintain the same standard of living.

The math is unforgiving — and it’s hitting seniors in categories that matter most: healthcare, food, housing, and insurance. Let me break down what’s actually happening, separate the panic from the reality, and give you a concrete plan to stop the bleed.

Where the Money Is Actually Going: The Inflation Categories Crushing Retirees

Not all inflation is created equal, and that’s a critical distinction for anyone over 50. The Consumer Price Index for All Urban Consumers (CPI-U) gets the headlines, but the Bureau of Labor Statistics also tracks the CPI-E — an experimental index weighted toward expenditure patterns of Americans 62 and older. The CPI-E has consistently outpaced the standard CPI by 0.2 to 0.3 percentage points annually over the past decade.

Why? Because retirees spend disproportionately more on the categories that have inflated the fastest.

Healthcare: The Silent Budget Destroyer

Medical care costs have risen approximately 4.5% annually over the last three years, outpacing general inflation in 2024 and early 2025. For a retiree couple, Fidelity’s 2024 Retiree Health Care Cost Estimate pegged lifetime out-of-pocket medical expenses at $315,000 — up from $300,000 just a year prior. That figure doesn’t include long-term care.

What I see most often in my practice is clients underestimating their Medicare Part B and Part D premium increases, especially when they trigger IRMAA (Income-Related Monthly Adjustment Amount) surcharges. A single retiree with modified adjusted gross income above $106,000 in 2025 pays significantly higher Medicare premiums — and many don’t realize that a one-time Roth conversion or capital gain can push them into a higher bracket for two years.

Food and Housing: The Daily Pinch

Grocery prices are up roughly 25% since 2020. Homeowner’s insurance premiums have surged 33% nationally over the same period, with some Sun Belt states seeing increases of 50% or more. Property taxes, often tied to rising home valuations, have compounded the problem.

For retirees on fixed incomes, these aren’t abstract statistics. They’re the reason the grocery bill that used to be $400 a month is now $500, and the insurance payment that was $1,200 annually is now $1,600.

The Social Security COLA Gap: Why Your Raise Didn’t Keep Up

Social Security’s Cost-of-Living Adjustment (COLA) is supposed to be the safety net against inflation. In theory, it tracks the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) and adjusts benefits accordingly. In practice, the gap between the COLA and actual retiree spending inflation has been growing.

Consider the recent COLA history:

• 2022: 5.9% COLA (actual inflation for seniors closer to 7.1%)
• 2023: 8.7% COLA (the largest in 40 years, but it was retroactive — prices had already risen)
• 2024: 3.2% COLA
• 2025: 2.5% COLA

The 2025 adjustment brought the average Social Security retirement benefit to approximately $1,976 per month, or $23,712 annually, according to the Social Security Administration. Early forecasts for the 2027 COLA suggest a potential increase of 2.2% to 2.6%, depending on inflation trends through Q3 2026.

Here’s the problem I explain to my clients constantly: COLA adjustments are backward-looking. They compensate you for last year’s inflation, not next year’s. And when inflation spikes rapidly — as it did in 2021 and 2022 — retirees absorb months of higher costs before the adjustment kicks in. That lag effect eroded purchasing power that, for many, has never fully recovered.

If you’re relying on Social Security as your primary income source, I’d encourage you to read our deep dive into 6 Retirement Inflation Myths Seniors Believe That Are Wrong, because several common assumptions about COLA protection are dangerously inaccurate.

The Withdrawal Rate Crisis: Are You Drawing Down Too Fast?

The traditional “4% rule” — the guideline suggesting retirees can safely withdraw 4% of their portfolio annually, adjusted for inflation — was developed by financial planner Bill Bengen in 1994 using historical market data. It assumed a balanced portfolio and a 30-year retirement horizon.

But the 4% rule is under serious strain in 2025, for three interconnected reasons:

1. Longer Retirements

A 65-year-old American today has a life expectancy of approximately 84 (men) to 87 (women), according to the Society of Actuaries. But those are averages. A healthy 65-year-old couple has roughly a 50% chance that at least one partner will live past 90. That’s potentially a 25- to 30-year retirement, and many financial plans aren’t built for that duration.

2. Sequence-of-Returns Risk

If you retired in early 2022 and your portfolio dropped 15-20% while you were simultaneously withdrawing, you experienced what financial planners call “sequence-of-returns risk.” Taking withdrawals during a down market permanently reduces your portfolio’s recovery potential. I’ve seen clients lose five or more years of runway because of poorly timed withdrawals during the 2022 correction.

3. Inflation-Adjusted Withdrawals Keep Climbing

If you started retirement in 2020 withdrawing $40,000 per year and adjusted annually for actual inflation, you’d now need to withdraw approximately $48,800 to maintain the same purchasing power. That’s a 22% increase in dollar withdrawals from a portfolio that may not have grown 22% after accounting for the 2022 downturn.

The result? The EBRI data showing 37% of retirees depleting savings faster than planned suddenly makes complete sense. It’s not financial irresponsibility — it’s arithmetic.

The Emotional Toll: Inflation Fear vs. Inflation Reality

I want to be honest about something I observe in my practice almost weekly: the psychological impact of inflation anxiety is often more damaging than the inflation itself.

A 2025 Alliance for Lifetime Income survey found that 67% of retirees listed inflation as their top financial concern, ahead of market crashes, healthcare costs, and outliving savings. Yet when researchers at the Center for Retirement Research at Boston College actually tracked retiree spending, they found that real spending (inflation-adjusted) tends to decline naturally by about 1-2% per year after age 65, as retirees travel less, eat out less, and generally reduce discretionary spending.

This creates a paradox: retirees feel squeezed by inflation, but many are simultaneously spending less in real terms. The squeeze is real in specific categories — healthcare, insurance, groceries — but total spending often decreases because discretionary categories shrink.

The danger is that inflation fear drives bad financial decisions: panic-selling investments during downturns, hoarding cash that loses purchasing power, or falling for high-yield investment scams that promise inflation-beating returns. For a reality check on what the data actually shows, take a look at Retiree Inflation Fears vs. Reality: 5 Myths Draining Your Savings.

A CPA’s 8-Step Plan to Stop Depleting Your Retirement Savings Too Fast

I’ve developed this framework over years of working with retirees who came to me worried they were running out of money. These steps aren’t theoretical — they’re drawn from real client situations and real results.

1. Run an updated cash flow analysis — today, not next year. Pull your last 12 months of bank and credit card statements. Categorize every dollar. Most retirees I work with discover $200-$500 per month in spending they didn’t realize was happening — subscription services, auto-renewals, redundant insurance coverage, or inflated cable/internet packages. This single exercise has saved some of my clients thousands annually.
2. Stress-test your withdrawal rate. If you’re pulling more than 4.5% of your portfolio annually, you’re in the danger zone for a 25-year retirement. Use a free tool like the Investopedia retirement calculator or FIRECalc to model your specific scenario with historical market data. Adjust your spending or income sources if the failure rate exceeds 15%.
3. Optimize your Social Security claiming strategy. Every year you delay claiming Social Security between 62 and 70, your benefit increases by approximately 6-8%. For a retiree whose full retirement age benefit is $2,200 per month, waiting from 62 to 70 could mean the difference between $1,650 and $2,904 monthly — that’s $15,048 more per year, guaranteed and inflation-adjusted for life. If you have other assets to bridge the gap, delaying almost always pays off mathematically.
4. Implement a “bucket strategy” for withdrawals. Divide your assets into three buckets: Bucket 1 (1-2 years of expenses in cash or money market), Bucket 2 (3-7 years in bonds and conservative allocations), and Bucket 3 (8+ years in growth investments). This structure prevents you from selling equities during downturns and gives your growth investments time to recover.
5. Review your Medicare coverage annually during Open Enrollment. I cannot overstate this. Medicare Advantage plans change their networks, formularies, and out-of-pocket maximums every year. A plan that saved you money in 2024 might cost you $2,000 more in 2026 because your prescription moved to a higher tier. Compare plans at Medicare.gov every October through December 7.
6. Manage your tax bracket proactively. Strategic Roth conversions in lower-income years can reduce future Required Minimum Distributions (RMDs), lower your lifetime tax bill, and help you avoid IRMAA surcharges on Medicare premiums. I typically recommend converting enough each year to “fill up” the 12% or 22% bracket without spilling into the next one. This is one of the most powerful and underutilized strategies in retirement tax planning.
7. Add at least one inflation-resistant income stream. This might be Treasury Inflation-Protected Securities (TIPS), I Bonds (currently yielding a fixed rate plus inflation adjustment), a single premium immediate annuity (SPIA), or even part-time consulting work in your field of expertise. Having just $500-$1,000 per month in inflation-adjusted income beyond Social Security dramatically reduces portfolio pressure. For more options, read our guide to 7 High-Return Low-Risk Investments for Retirees in 2025.
8. Schedule an annual “retirement checkup” with a fee-only fiduciary advisor or CPA. Not a product salesperson. Not someone who earns commissions. A fee-only professional who is legally obligated to act in your interest. One comprehensive review per year — covering tax planning, withdrawal strategy, insurance adequacy, and estate documents — typically costs $500-$2,000 and can save multiples of that amount.

The Six-Year Clock: What Congress’s Social Security Deadline Means for You

The Social Security Board of Trustees projects that the Old-Age and Survivors Insurance (OASI) Trust Fund will be depleted by approximately 2033. If Congress takes no action, benefits would automatically be reduced to about 79% of scheduled amounts — meaning a $2,000 monthly check would drop to roughly $1,580.

That’s not speculation. It’s the actuarial baseline published by the Social Security Administration itself.

In my experience, most retirees either don’t know this deadline exists or assume Congress will “figure it out.” Both reactions are understandable, but neither is a financial plan. I tell every client over 50 the same thing: plan for 100% of your promised benefit, but build flexibility into your budget for a potential 20% reduction. If Congress acts and benefits remain intact, you’ll have a comfortable margin. If they don’t, you won’t be blindsided.

The most likely legislative solutions involve some combination of raising the payroll tax cap (currently $168,600 in 2025), gradually increasing the full retirement age, modifying the benefit formula for higher earners, or adjusting the COLA calculation. Any of these changes could affect your retirement math, which is why flexibility matters more than prediction.

The Bottom Line: Urgency Without Panic

The data is clear — retirees are depleting savings faster than planned, and inflation is the primary driver. But the data also shows that proactive planning dramatically changes outcomes. The retirees I work with who review their finances annually, adjust their strategies, and resist emotional decision-making are overwhelmingly in better shape than those who set a plan in 2019 and never revisited it.

If you’re reading this and feeling anxious about your own numbers, that anxiety is appropriate — but only if it motivates action. Start with step one above. Pull those statements. Know your real spending. Everything else builds from that foundation.

The retirees who run out of money aren’t the ones who earn the least. In my experience, they’re the ones who wait the longest to look at the numbers honestly. You’re reading this article — which means you’re already ahead of the curve. Now turn that awareness into a plan.