Forget COLAs: My Bold Strategy to Outsmart Inflation in Retirement

Every October, Social Security rolls out its much-anticipated cost-of-living adjustment (COLA) for the year ahead. Some years, it’s a generous boost—like the jaw-dropping 8.7% increase we saw in 2023. But then there are the more disappointing years, like 2010, 2011, and 2016, where the COLA was practically nonexistent.

Unfortunately, 2025 is looking like one of those less-than-stellar years. According to a recent survey, 54% of retirees believe that the projected 2.5% COLA simply won’t cut it against rising costs. On a positive note, a smaller COLA often indicates that inflation is beginning to take a breather.

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Let’s be honest: while COLA is a helpful cushion, it’s far from a guaranteed strategy for tackling long-term inflation. With that in mind, I’m not placing my bets solely on COLA—or Social Security, for that matter—to see me through retirement.

Sure, I’ve got a couple of decades until I can even start tapping into Social Security, and plenty could change by then. That’s why I’m taking proactive steps today to ensure that my golden years won’t rely on unpredictable numbers.

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Why Relying on COLA Could Be Risky for Retirement

First off, let’s talk about the financial health of Social Security. The latest reports indicate that reserves could be depleted by 2035, potentially leading to benefit cuts unless Congress takes action.

Now, factor in inflation. While the COLA is intended to help Social Security benefits keep pace with rising prices, your actual expenses—like healthcare, housing, and groceries—can easily outstrip these adjustments.

My Strategy to Combat Inflation

Here’s how I’m equipping myself to avoid being at the mercy of COLA when inflation hits:

• Supercharge My Retirement Accounts: My mission is to max out my retirement accounts whenever I can. Whether it’s my 401(k) or another employer-sponsored plan, I prioritize contributing as much as possible—especially when there’s an employer match. If I ever find myself without a workplace plan, I pivot to options like a SEP IRA, ensuring my retirement savings keep growing. And no matter my work situation, I can always contribute to a Roth or traditional IRA as long as I’m earning income.

• Create a Dividend Portfolio: Beyond retirement accounts, I invest in a taxable brokerage account, focusing on dividend-paying assets for additional retirement income. Why? Because they provide a consistent income stream without the need to sell my investments. Plus, there’s no cap on how much I can invest in this account. My goal is to build a diverse portfolio of dividend stocks along with growth stocks. I zero in on companies with a solid track record of regular payouts, many of which increase their dividends over time—perfect for keeping pace with inflation.

• Keep a Tight Grip on My Finances: Since market returns can be unpredictable, I’m focused on taking control of my financial future now. I closely monitor my income and expenses to estimate what I’ll need in retirement to cover everyday costs. This way, I can avoid overspending because inflation can really throw a wrench in your financial plans. On the earnings side, I’m continually upgrading my skills to enhance my income potential. Whether it’s obtaining new certifications or diving into emerging technologies, I’m committed to expanding my value in the workforce, ensuring I have options down the line.

Consider Crafting Your Own Retirement Blueprint

While COLA provides some relief for retirees, I wouldn’t put all my eggs in that basket—and honestly, you might want to reconsider too. The risk of cuts to benefits makes it even less reliable. And remember, Social Security was never meant to be your primary source of income.

The silver lining? You can start building your own financial safety net today. By taking charge of your skills, savings, and investments, you’ll create a sturdy cushion for your future—regardless of what happens with Social Security and COLA in the years to come.

The $22,924 Social Security Boost That Many Retirees Overlook

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