Beat Inflation: My Smart Retirement Plan Beyond Social Security COLAs!
Every October, Social Security rolls out its annual cost-of-living adjustment (COLA), and let’s be honest: some years it’s like winning the lottery, while other years feel like a cruel joke. Just look at 2023, where recipients enjoyed a jaw-dropping 8.7% increase! But then there are those less-than-stellar years, such as 2010, 2011, and 2016, when the COLA was practically nonexistent.
Now, fast forward to 2025, and it appears we might be in for another disappointment. A recent survey of 2,000 retirees revealed that a staggering 54% believe the projected 2.5% COLA won’t come close to covering the steep rise in living costs. But hey, on the bright side, a lower COLA could mean inflation is finally taking a breather.
The truth is, while COLA offers a helping hand, it’s far from a safety net for long-term inflation woes. I’m not placing my bets on COLA—or Social Security, for that matter—to sustain me through retirement.
Sure, I’ve got a couple of decades before I can even think about tapping into Social Security. But I’m not leaving my future up to chance; I’m taking proactive steps now to ensure my retirement isn’t a waiting game based on factors I can’t control.
For starters, let’s get real: Social Security’s financial health is shaky at best. The 2024 Trustees’ Report warns that reserves could run dry by 2035, leading to potential benefit cuts unless Congress steps in.
Now, throw inflation into the equation. While COLA is meant to help Social Security benefits keep pace with rising costs, even with annual adjustments, your expenses for essentials—like healthcare, housing, and groceries—can rocket far beyond any increase.
So, what am I doing to make sure I’m not left high and dry when inflation strikes? Here’s my game plan:
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Supercharge retirement accounts: My mission? Max out those retirement accounts whenever I can! When I’m in full-time work mode, I prioritize contributing the maximum to my 401(k) or similar employer-sponsored plan—especially when there’s a match! Even if I don’t have access to a workplace plan, I pivot to options like a SEP IRA to keep my savings journey on track. And the best part? I can always contribute to a Roth or traditional IRA as long as I’m earning.
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Create a dividend portfolio: Beyond my retirement accounts, I invest in a taxable brokerage account, focusing on dividend-paying assets for income during retirement and sabbaticals. This strategy ensures I have cash flow without selling my investments. It’s all about building a diverse portfolio of dividend stocks alongside my growth investments, with companies that have a solid track record of payouts—and some even offer automatic raises! This approach is a lifesaver for keeping pace with inflation.
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Monitor income and expenses: Since market returns aren’t guaranteed, I focus on what I can control now to ease my future. Keeping a close watch on my income and expenditures lets me accurately estimate what I’ll need in retirement. Plus, tracking my spending helps me avoid overshooting my budget—because, let’s face it, inflation can really throw a wrench in your plans. On the income side, I prioritize learning and skill-building to boost my earning potential. Whether it’s earning new certifications or diving into emerging technologies, I’m committed to enhancing my value. This way, I’ll always have options!
