Navigating Retirement: Strategies for a Secure Future

October 27, 2025

Greg Farrall, AIF®, CPFA®, CWS®, PPC® | CEO/Owner/Financial Advisor

For retirees and those approaching retirement age, ensuring that savings will support a long retirement is crucial. This challenge has grown due to inflation over the past several years, which has eroded the purchasing power of cash savings. Today, prices remain elevated in key spending areas that affect retirees the most, including healthcare, housing, and everyday necessities.

Even though stocks and bonds are well-positioned to meet this challenge, some retirees may be risk-averse. Others may wonder if their portfolios and savings will be enough to combat the rising cost of living. For long-term investors, understanding how inflation affects retirement income and how to position portfolios to maintain purchasing power is more important than ever. What should retirees and those planning for retirement know about navigating today's environment?

Social Security Adjustments and Inflation

The Social Security Administration recently announced a 2.8% cost-of-living adjustment (COLA) for 2026, reflecting ongoing inflation. While any increase helps, the reality is that the price increases measured by economists can differ from our daily experiences. Specifically, this will raise the average monthly benefit to $2,064, an increase of only $56. This is small compared to the 8.7% adjustment in 2023, which was the largest since 1981.

The challenge for retirees is that while price increases may slow, prices themselves rarely come down. The COLA is calculated using the CPI-W, a version of the Consumer Price Index that tracks prices for working-class households. However, this doesn't account for the fact that retirees often face different inflation rates than younger workers. Healthcare costs, housing expenses, and other categories that weigh heavily in retiree budgets have frequently risen faster than the overall index suggests.

For example, medical care services rose 3.9% over the past year, health insurance increased 4.2%, and home insurance climbed 7.5%. Food prices increased 3.1% during this period, but meat, poultry, and fish rose 6.0%. The cost of full-service restaurants also grew by 4.2%.

Adding to the challenge, Medicare Part B premiums could rise by $21.50 per month in 2026, from $185 to $206.50, according to the latest Medicare trustees' estimates. Since this is typically deducted directly from Social Security checks, this would account for approximately 38% of the average $56 COLA increase, leaving retirees with even less purchasing power.

The Importance of Portfolio Growth

Just as gains can compound over time, so do losses if the purchasing power of a portfolio does not keep up with inflation. This is even more important today since retirees must also plan for the possibility of living longer than previous generations. Life expectancy is an essential input to any financial plan.

According to the latest Social Security Administration data, 40-year-old men and women have an average life expectancy of 79 and 83, respectively. However, for those who reach 65 years of age, their life expectancies increase to 83 and 86, respectively. These are just averages—those in the 90th percentile could live to 94 and 97, respectively.

While the opportunity to enjoy a longer, healthier retirement is a wonderful development over the past century, the difference between a 20-year retirement and a 30-year or longer retirement has dramatic implications for portfolio construction and withdrawal strategies. This is sometimes known as “longevity risk,” a challenge that is asymmetric since running out of money during retirement is far more problematic than leaving assets to loved ones or charitable causes.

So, while many prioritize income-generating investments like bonds in retirement planning, it’s also essential to maintain growth-oriented assets like stocks. This creates financial challenges that make thoughtful planning even more valuable. Understanding how to structure portfolios for multi-decade retirement periods, while managing withdrawal rates and adapting to changing market conditions, requires expertise that goes well beyond simple rules of thumb.

The Impact of Lower Interest Rates on Cash Income

The recent Consumer Price Index data, which had been delayed due to the government shutdown, also has implications for Federal Reserve policy and interest rates more broadly. With inflation moderating and the job market weakening, the Fed is expected to continue gradually lowering policy rates. This shift, while positive for many parts of the economy, will likely reduce the interest income available from cash and money market accounts over time.

For retirees who have relied on interest income from their cash holdings over the past few years, this return to a lower interest-rate environment may pose a challenge. While holding some cash for near-term expenses and emergencies remains important, relying too heavily on cash means missing out on the growth potential of stocks and the attractive yields still available in many bond sectors.

The combination of moderating but persistent inflation and declining interest rates creates a challenging environment for conservative investors. Cash loses purchasing power to inflation, and the interest it generates will fall as the Fed continues cutting rates. This makes it even more important for retirees to hold a balanced portfolio that includes growth-oriented assets like stocks, which have historically outpaced inflation over long periods, alongside bonds that can provide income and stability.

Strategies for a Secure Retirement

As we navigate these complex financial waters, it’s essential to adopt a proactive approach. Here are some strategies to consider for securing your retirement:

Diversify Your Portfolio

Diversification is key. By spreading investments across various asset classes, you can reduce risk and improve potential returns. Consider a mix of stocks, bonds, and alternative investments to create a balanced portfolio.

Focus on Growth

While income-generating investments are important, don’t overlook growth-oriented assets. Stocks can provide the necessary growth to outpace inflation over time. Look for companies with strong fundamentals and growth potential.

Monitor Your Expenses

Keep a close eye on your spending. Understanding where your money goes can help you make informed decisions about your budget. This is especially important as healthcare and housing costs continue to rise.

Plan for Longevity

With life expectancies increasing, it’s crucial to plan for a longer retirement. Consider your withdrawal strategy carefully. A sustainable withdrawal rate can help ensure your savings last throughout your retirement.

Seek Professional Guidance

Navigating retirement planning can be complex. Consider working with a financial advisor who can help tailor a strategy to your unique situation. They can provide insights into market trends and help you make informed decisions.

The Bottom Line

While Social Security COLA provides some help against inflation, it’s difficult for retirees to rely on this alone. With life expectancies increasing and short-term interest rates declining, investors need portfolios that can provide both income and growth.

In conclusion, it’s essential to stay informed and proactive in your retirement planning. By understanding the challenges and adopting effective strategies, you can work towards a secure and fulfilling retirement.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC

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