A Startling Number That Should Alarm Every Retiree
Here’s a finding that stopped me cold when I first reviewed the data: 37% of retirees surveyed in 2025 reported withdrawing from their retirement savings at a faster rate than they had planned, with inflation cited as the primary driver. That number, drawn from the Employee Benefit Research Institute’s most recent Retirement Confidence Survey, represents a dramatic acceleration from the 28% who said the same thing just two years earlier.
In my 18 years as a Certified Financial Planner, I’ve watched clients navigate recessions, market crashes, and policy shifts. But the current convergence of persistent inflation, rising Medicare costs, and uncertain Social Security adjustments is creating something I call a “depletion spiral” — a self-reinforcing cycle where retirees draw down principal faster, earn less on what remains, and face even larger shortfalls down the road.
This isn’t a theoretical risk. It’s happening right now across kitchen tables, bank lobbies, and my own office. Let me walk you through exactly why retirement savings are vanishing faster than projected, what the latest data tells us, and — most critically — the concrete steps you can take to reverse the trend.
The Three Forces Draining Retirement Accounts
1. Inflation That Hits Seniors Harder Than Official Numbers Suggest
The Consumer Price Index for All Urban Consumers (CPI-U) gets most of the headlines, but the Bureau of Labor Statistics also tracks the CPI-E — an experimental index weighted toward expenditures by Americans 62 and older. The CPI-E has historically run 0.2 to 0.3 percentage points higher than the standard CPI because older adults spend proportionally more on two categories that inflate fastest: healthcare and housing.
What I see most often in practice is clients who built their retirement plans around a 2.5% inflation assumption — perfectly reasonable based on the 20-year average before 2021. But from 2021 through mid-2026, cumulative inflation has exceeded 22%, meaning a retiree who needed $5,000 per month in January 2021 now needs roughly $6,100 to maintain the same standard of living. That $1,100 monthly gap has to come from somewhere, and for most, it comes from accelerated portfolio withdrawals.
If you’re feeling the squeeze, you’re not imagining it. I’ve written extensively about the mechanisms behind this in Inflation Triple Threat for Retirees: 7 CPA Moves, and the math is unforgiving.
2. Medicare Premiums That Devour COLA Increases
Social Security benefits rose 2.8% in 2026, translating to roughly $50 more per month for the average retired worker receiving $1,927. But Medicare Part B premiums simultaneously climbed to $185.00 per month — an increase of $10.30 from 2025. For many beneficiaries, especially those on higher-income IRMAA brackets, the premium increase consumed a third or more of their COLA gain.
The Senior Citizens League now projects the Social Security 2027 COLA at 3.8%, which sounds encouraging until you factor in anticipated Medicare cost increases for 2027. As I detailed in a recent analysis on Social Security 2027 COLA 3.8%: Why Medicare Premiums Eat It, historical patterns show that roughly 40-60% of each COLA adjustment gets absorbed by rising healthcare costs — particularly for retirees enrolled in Medicare Advantage plans, where out-of-pocket maximums have risen steadily.
3. The “Silent Killer” — Sequence-of-Returns Risk
Financial researchers call it the silent killer for retirement portfolios, and the label is accurate. Sequence-of-returns risk refers to the danger of experiencing poor investment returns in the early years of retirement, precisely when you’re also withdrawing funds for living expenses.
Consider two hypothetical retirees who both average 7% annual returns over 20 years. If Retiree A gets strong returns in years 1-5 and weak returns in years 16-20, her portfolio survives comfortably. If Retiree B gets those same weak returns first, her portfolio can be exhausted five to eight years earlier — even though the average return is identical.
Retirees who began withdrawals in 2022 — the year the S&P 500 fell 19.4% — are especially vulnerable. Many locked in losses while simultaneously pulling out 4-5% for living expenses, creating a compounding deficit that subsequent market recoveries have not fully repaired.
How Fast Are Savings Actually Disappearing?
Let me put some real numbers to this crisis. According to the Federal Reserve’s 2023 Survey of Consumer Finances (the most recent complete dataset), the median retirement account balance for households headed by someone aged 65-74 was approximately $200,000. For those 75 and older, it dropped to $130,000.
At a 4% annual withdrawal rate — the traditional “safe” benchmark developed by financial planner William Bengen in 1994 — a $200,000 portfolio generates $8,000 per year, or about $667 per month. Combined with the average Social Security benefit of roughly $1,927 per month, that’s $2,594 in total monthly income before taxes.
The average monthly expenditure for households headed by someone 65 and older? According to the Bureau of Labor Statistics’ Consumer Expenditure Survey: approximately $4,345 in 2024 dollars. That leaves a gap of over $1,750 per month — a gap that many retirees fill by withdrawing far more than 4%, depleting their savings years ahead of schedule.
I often tell my clients that the 4% rule was designed for a different era. With today’s longer lifespans, higher healthcare costs, and more volatile markets, many researchers — including Wade Pfau at the American College of Financial Services — now suggest that 3.3% or even 3% may be more appropriate for retirees expecting a 30-year drawdown period. That, of course, means even less monthly income from the same portfolio.
What the Latest Policy Proposals Mean for Your Money
There is some potentially positive legislative movement. Congressman John Larson and Senator Richard Blumenthal recently introduced a bill aimed at strengthening Social Security by adjusting the benefit formula and applying payroll taxes to earnings above $400,000 — a move that could extend the trust fund’s solvency beyond the current projected depletion date of 2033.
Separately, new approaches to Social Security benefit taxation are being debated in Congress. Currently, up to 85% of Social Security benefits can be subject to federal income tax, depending on your “combined income” (adjusted gross income + nontaxable interest + half of Social Security benefits). The income thresholds — $25,000 for single filers and $32,000 for joint filers — haven’t been adjusted for inflation since 1993, which means millions more retirees are taxed on their benefits each year simply because nominal incomes have risen.
While I’m cautiously optimistic about reform, I counsel every client to plan based on current law, not proposed changes. If legislation passes, you can adjust. If it doesn’t, you won’t be caught short. For more on the gap between perception and reality, see Social Security Myths Retirees Still Believe in 2026.
Seven Steps to Slow — and Potentially Reverse — Savings Depletion
After working with hundreds of retirees navigating exactly this challenge, I’ve distilled the most effective strategies into a prioritized action list. Not every step applies to every household, but nearly every retiree I’ve counseled benefits from at least three or four of these moves.
- Recalculate your true withdrawal rate immediately. Log into your brokerage or 401(k) account and divide your total withdrawals over the past 12 months by your portfolio balance as of January 1. If the number exceeds 4.5%, you’re in the danger zone. If it exceeds 6%, this is urgent.
- Build a “spending floor” with guaranteed income. Social Security is your foundation. If you’re between 62 and 70 and haven’t yet claimed, every year you delay increases your benefit by approximately 8%. For a retiree with a full retirement age benefit of $2,000, waiting from 67 to 70 boosts the monthly check to $2,480 — a $5,760 annual increase that’s inflation-adjusted for life. Consider whether a single-premium immediate annuity (SPIA) could convert a portion of savings into a second guaranteed income stream. Investopedia’s annuity guides provide useful comparison tools.
- Audit your Medicare coverage during Open Enrollment. I review every client’s Medicare plan annually. Switching from a Medicare Advantage plan to Original Medicare with a Medigap supplement — or vice versa — can save $1,000-$3,000 per year depending on your health profile and prescription needs. Use Medicare.gov’s plan finder to compare total estimated costs.
- Implement a “bucket strategy” for withdrawals. Divide your portfolio into three buckets: 1-2 years of expenses in cash or money market funds (your safety net), 3-7 years in intermediate-term bonds and CDs, and the remainder in diversified equities for long-term growth. This structure lets you avoid selling stocks during downturns — directly neutralizing sequence-of-returns risk.
- Harvest tax losses and manage bracket exposure. If you have taxable investment accounts, selling positions at a loss can offset capital gains and up to $3,000 of ordinary income annually. Simultaneously, consider Roth conversions in years when your income is low enough to stay in the 12% or 22% bracket. This can reduce future Required Minimum Distributions, lower your Medicare IRMAA surcharges, and shrink the tax bite on Social Security benefits.
- Cut the three expenses retirees most commonly overpay. In my experience, the three biggest savings opportunities are property and casualty insurance (re-quote annually — switching carriers saves an average of 15-20%), prescription drugs (use GoodRx or CostPlus Drugs alongside your Part D plan), and subscription services (the average American household spends $91/month on subscriptions, per a 2024 C+R Research study, and often doesn’t realize it).
- Protect your assets from fraud. Retirees lose an estimated $28.3 billion annually to financial exploitation, according to AARP. Every dollar lost to a scam is a dollar permanently removed from your retirement runway. Freeze your credit, enable two-factor authentication on financial accounts, and educate yourself on the latest tactics — our guide on Online Scams Targeting Older Adults: A Deep-Dive Defense Guide is a thorough starting point.
The Withdrawal Rate Reality Check
To illustrate just how dramatically withdrawal rates affect portfolio longevity, consider this comparison based on a $300,000 starting portfolio with a 6% average annual return and 3% inflation:
At a 4% initial withdrawal rate ($12,000/year, adjusted for inflation), the portfolio survives approximately 28 years. At 5%, that drops to roughly 22 years. At 6%, you’re looking at about 17 years. And at 7% — which is closer to what many retirees are actually withdrawing, based on the data — the money runs out in approximately 14 years.
For a 65-year-old retiree, a 14-year portfolio lifespan means funds are exhausted by age 79. Average life expectancy for a 65-year-old American is now 84.5 for men and 87 for women. That’s a five-to-eight-year gap of living with no portfolio income — only Social Security and whatever other resources exist.
This is why I call it a crisis, not a concern. The math doesn’t leave room for optimism without action.
When to Seek Professional Help
If your withdrawal rate is above 5%, if you’re unsure how Social Security taxation affects your total income picture, or if you’ve never stress-tested your retirement plan against a sustained market downturn, it’s time to work with a fee-only fiduciary financial planner. Look for the CFP® designation and confirm fiduciary status — meaning the planner is legally required to act in your best interest.
The National Association of Personal Financial Advisors (NAPFA) and the Garrett Planning Network both offer directories of fee-only planners, many of whom charge by the hour or offer flat-fee plans specifically designed for retirees. A single comprehensive planning session typically costs $1,500-$3,000 and can save multiples of that amount over the course of a retirement.
For those looking to maintain overall well-being alongside financial health — because stress about money has documented effects on cognitive function and physical health — consider exploring 10 Hobbies for Seniors That Boost Brain and Body Health as a complement to your financial planning.
The Bottom Line: Urgency Without Panic
The depleting retirement savings crisis is real, measurable, and accelerating. But it is not irreversible. Every month you continue withdrawing at an unsustainable rate is a month that shortens your portfolio’s lifespan — but every strategic adjustment you make extends it.
Start with Step 1 above. Calculate your actual withdrawal rate today. That single number will tell you more about your financial future than any headline, projection, or political promise. And from there, build a plan that accounts for the world as it actually is — not as we wish it were.
Your savings took decades to accumulate. They deserve a strategy that makes them last just as long.
About Margaret Chen, CFP®, MBA Finance
Margaret Chen is a Certified Financial Planner™ (CFP®) with more than 18 years of experience guiding American seniors through retirement planning, Social Security optimization, and Medicare decisions. She holds an MBA in Finance and has dedicated her career to helping retirees protect their savings, maximize their benefits, and avoid the most common financial mistakes that derail retirement. At Daily Trends Now, Margaret writes practical, fact-checked guides that translate complex financial topics into clear action steps for older Americans.
