Seniors Depleting Retirement Savings Too Fast: A CPA’s Guide

By Robert Thompson, CPA, EA (Enrolled Agent)

Certified Public Accountant (CPA) • Updated August 18, 2026

The Phone Call That Changed How I Talk About Retirement

Last March, a longtime client I’ll call Frank — a 71-year-old retired electrician from outside Cleveland — called my office in a panic. His voice was steady, the way men of his generation tend to hold it together, but the numbers he was describing told a different story. In just four years of retirement, Frank had burned through nearly 40% of his $380,000 nest egg. He’d planned for that money to last until 85. At his current pace, it would be gone by 76.

“I’m not living extravagantly, Rob,” he told me. “I don’t know where it’s all going.”

I did. After twenty-two years as a CPA and Enrolled Agent, I’ve seen Frank’s story dozens of times. And in 2026, I’m seeing it more than ever. The culprits aren’t lavish vacations or sports cars. They’re grocery bills, Medicare premiums, property taxes, and the slow, relentless grind of inflation on a fixed income. Seniors are depleting retirement savings at a pace that would have seemed unthinkable a decade ago — and many don’t realize how much danger they’re in until the account balance forces a crisis.

The Numbers Behind the Crisis: Why 2026 Is a Tipping Point

A 2026 Employee Benefit Research Institute survey found that 37% of retirees are withdrawing from savings faster than they originally planned. That’s up from 30% in 2023. Meanwhile, the Federal Reserve’s Survey of Consumer Finances shows the median retirement account balance for households headed by someone 65-74 is roughly $200,000 — a number that sounds substantial until you realize it needs to cover potentially two decades of living expenses.

The math is brutally simple. At a 5% annual withdrawal rate — which many financial planners already consider aggressive — $200,000 generates only $10,000 a year. Combined with the average Social Security benefit of $1,976 per month (as of January 2026, per the Social Security Administration), that’s a total annual income of roughly $33,700. For a single retiree, that’s barely above the poverty-adjusted threshold in most metropolitan areas.

“What I see most often is not reckless spending — it’s the quiet accumulation of costs that were predictable but never planned for. Healthcare alone can consume 15-20% of a retiree’s annual budget, and that percentage is climbing every year.”

Frank’s situation was textbook. His monthly Medicare Part B premium had risen to $185 in 2026, up from $170.10 just two years earlier. His Medigap supplement added another $240. Prescription costs through Part D ate up another $120 monthly. That’s $545 a month — $6,540 a year — just for health insurance, before a single doctor visit or procedure. Layer on property taxes that jumped 12% over three years and a grocery bill that inflation pushed up by roughly 20% since 2021, and Frank’s “comfortable” budget had become anything but.

Where the Money Actually Goes: A Retiree Spending Autopsy

When I sat down with Frank and traced every dollar from the prior 12 months, the breakdown looked like this: housing costs (including maintenance, insurance, and taxes) consumed 33% of his total spending. Healthcare took 19%. Food and household supplies claimed 14%. Transportation — he still drove and maintained a truck — accounted for 11%. The remaining 23% went to utilities, modest charitable giving, occasional gifts to grandchildren, and the small emergencies that define daily life.

None of these categories screamed waste. That’s exactly the problem. When people imagine retirement savings running out, they picture bad decisions. In reality, what I see in my practice is perfectly reasonable spending that simply outpaces a portfolio designed for a lower-cost era.

This pattern is echoed nationally. As we’ve covered in our analysis of the 5 biggest financial concerns for retirees, the top worry isn’t market crashes or fraud — it’s the grinding daily cost of simply staying alive and housed.

The Inflation Factor: Not as Simple as a Single Number

Here’s something I often tell my clients that surprises them: the official Consumer Price Index doesn’t reflect what retirees actually experience. The Bureau of Labor Statistics publishes an experimental index called the CPI-E (for elderly), which tracks spending patterns of households headed by someone 62 or older. It consistently runs 0.2 to 0.3 percentage points higher than the standard CPI because it weights healthcare and housing more heavily — exactly the categories that hit retirees hardest.

Over a 20-year retirement, that seemingly small difference compounds dramatically. A retiree who plans for 2.5% annual inflation but actually experiences 2.8% will find their purchasing power eroded roughly 6% more than expected over two decades. On a $300,000 portfolio, that’s the equivalent of losing an extra $18,000 in real value.

The 2026 COLA adjustment of 2.5% for Social Security benefits — while welcome — didn’t keep pace with what many seniors actually spent more on. As we explored in our piece on how inflation silently kills retirement portfolios, the disconnect between headline inflation and retiree-specific inflation is one of the most underappreciated risks in financial planning.

Frank’s Turnaround: A Step-by-Step Recovery Plan

After our initial audit, Frank and I built a plan over two sessions. It wasn’t glamorous. There was no magic investment or secret loophole. It was methodical, tax-aware, and grounded in the reality of his actual numbers. Here’s the framework I used — and the same one I’d recommend to any retiree who suspects they’re drawing down too fast.

1. Conduct a 90-day spending forensic. Track every dollar for three months. Not with an app (Frank didn’t trust them), but with a simple notebook and weekly bank statement reviews. We found $340/month in recurring charges he’d forgotten about — including a satellite radio subscription, a warehouse club membership he rarely used, and auto-pay on a life insurance policy he no longer needed.
2. Resequence your withdrawals for tax efficiency. Frank had been pulling money from his traditional IRA first because it was his largest account. This pushed him into a higher marginal tax bracket, meaning he owed roughly $2,400 more in federal taxes than necessary. We shifted to drawing from his taxable brokerage account first, preserving the IRA’s tax-deferred growth and keeping his adjusted gross income low enough to avoid IRMAA surcharges on Medicare premiums.
3. Reassess your Social Security claiming strategy. Frank had claimed benefits at 62 — the earliest possible age — locking in a permanently reduced benefit. While we couldn’t undo that decision, we restructured his other income sources to minimize the taxation of his Social Security. Under current IRS rules, up to 85% of Social Security benefits can be taxable if combined income exceeds $34,000 for a single filer. By managing his withdrawal amounts strategically, we kept his combined income below the threshold where only 50% is taxable — saving him roughly $1,100 annually.
4. Shift a portion of liquid savings into inflation-protected instruments. We moved $40,000 of Frank’s taxable account into I Bonds (up to the $10,000 annual purchase limit over multiple years) and Treasury Inflation-Protected Securities (TIPS). These aren’t exciting investments, but they’re designed to preserve purchasing power — exactly what Frank needed. For more on this approach, see our guide to high-return, low-risk investments for retirees in 2026.
5. Review Medicare coverage annually during Open Enrollment. Frank had stayed on the same Medicare Advantage plan for three years without comparing alternatives. A 30-minute session on Medicare.gov revealed a competing plan in his county with lower specialist copays and a $0 premium — saving him $1,680 a year with no reduction in coverage quality.
6. Build a one-year cash buffer. Rather than selling investments in down markets to cover expenses — which locks in losses — we established a high-yield savings account holding roughly 12 months of essential expenses. This “spending reserve” means Frank never has to liquidate stocks or bonds at the worst possible time.

The combined impact of these six steps? Frank’s projected portfolio longevity extended from age 76 to approximately 84 — an eight-year improvement without earning a single extra dollar of income.

The Tax Trap Most Retirees Don’t See Coming

In my experience, the single most overlooked expense in retirement isn’t healthcare or housing — it’s taxes. Many retirees assume that once they stop working, their tax burden disappears. It doesn’t. Between Social Security benefit taxation, required minimum distributions (RMDs) from traditional IRAs and 401(k)s starting at age 73, and capital gains on investment sales, I regularly see retired clients with effective tax rates of 15-22%.

RMDs are particularly insidious. The IRS requires you to withdraw specific percentages from tax-deferred accounts each year, whether you need the money or not. These forced distributions count as ordinary income, can push you into a higher bracket, and can trigger the Medicare IRMAA surcharge — an additional premium of $70 to $420 per month on top of your standard Part B premium.

“I’ve watched clients lose more money to avoidable taxes in a single year of retirement than they lost in the 2008 financial crisis. Tax planning isn’t optional for retirees — it’s survival.”

One strategy I frequently recommend is strategic Roth conversions in the years between retirement and age 73 (when RMDs begin). By converting portions of a traditional IRA to a Roth — paying taxes now at a potentially lower rate — you reduce future RMD amounts and create a pool of tax-free income. For married couples with one spouse significantly younger, this can be especially powerful because Roth IRAs have no RMD requirements during the owner’s lifetime.

When “Safe” Withdrawal Rates Aren’t Safe Anymore

The famous “4% rule” — the idea that withdrawing 4% of your portfolio annually, adjusted for inflation, should sustain a 30-year retirement — was developed by financial planner William Bengen in 1994 using historical market data. It was a useful guideline for its era. But as Investopedia and numerous researchers have noted, the rule was built on assumptions that don’t fully hold in 2026: lower projected equity returns, longer life expectancies, and healthcare inflation that outpaces general inflation.

For my clients, I typically recommend a dynamic withdrawal strategy rather than a fixed percentage. In years when the portfolio grows, you can withdraw slightly more — say 4.5%. In years when markets decline or are flat, you pull back to 3% or 3.5% and supplement from your cash buffer. This flexibility prevents the sequence-of-returns risk that destroys portfolios — the devastating scenario where early retirement years coincide with a bear market, forcing you to sell low and permanently shrink your asset base.

Protecting What’s Left: The Emotional Side of the Equation

I want to end where Frank’s story ended — not with numbers, but with how he felt. When he first called me, he was ashamed. He believed he’d failed. That he should have saved more, worked longer, been smarter with money. That feeling of shame keeps millions of seniors from seeking help, from asking questions, from making the phone call that could change everything.

Here’s what I told Frank, and what I’ll tell you: the system wasn’t designed to be easy to navigate. Tax law alone fills tens of thousands of pages. Medicare has more plan variations than most people have shoes. Social Security’s benefit calculations use a formula that even actuaries find complex. If you’re confused, you’re not failing — you’re responding rationally to irrational complexity.

Six months after we implemented his plan, Frank called me again. This time his voice was different. “I slept through the night for the first time in a year,” he said. His account balance hadn’t magically doubled. But he had a plan, a budget that reflected reality, and — most importantly — a sense of control.

That’s what good financial planning does. It doesn’t make the challenges disappear. It makes them manageable. And for the 24.6 million seniors in this country relying primarily on Social Security, “manageable” isn’t a small word. It’s everything.

If you’re worried that your savings are disappearing faster than expected, you’re not alone — and more importantly, you’re not powerless. Start with the six steps above. Talk to a qualified CPA or financial planner who specializes in retirement income. And don’t wait until the account balance forces the conversation.

About Robert Thompson, CPA, EA (Enrolled Agent)

Certified Public Accountant (CPA)

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.