Tips to Handle Rising Costs in Retirement

Rising prices aren’t just an annoyance. They can eat into your hard-earned retirement savings.

In fact, 7 in 10 retirees say the rising cost of living has eaten into their savings, according to a 2025 Fidelity retirement survey.

With health care, housing and everyday expenses trending higher, it’s important to build a retirement plan that can stand up to inflation.

Having helped people reach and navigate retirement since 1986, we’ve seen firsthand how prices have changed and affected retirement plans. Heck, back then a McDonald’s hamburger cost around $0.50. So yes, we know how to help people address the very real threat inflation poses to retirement.

Here’s what you should know and do to help protect your retirement from rising costs.

Why does inflation matter so much in retirement?

In retirement, you’re often living on a fixed income from Social Security, pensions and savings. Inflation reduces your purchasing power, meaning your money doesn’t go as far over time.

Even moderate inflation can quietly drain your nest egg. For example, if inflation averages just 3% annually, something that costs $100 today would cost more than $180 in 20 years.

When you’re no longer working, keeping pace with rising costs becomes a matter of strategy, not just income.

What expenses are rising the fastest for retirees?

Health care is one of the biggest concerns.

It’s estimated that a 65-year-old retiring today can expect to spend $172,500 on health care throughout retirement. Prescription drugs, insurance premiums and long-term care are rising faster than most other expenses.

Other areas where retirees can feel the pinch:

• Housing (including taxes, insurance and maintenance)
• Food and groceries
• Transportation (especially auto insurance and repairs)
• Utilities and energy costs

Even if inflation cools overall, these categories often continue to rise due to demographics and sustained demand.

How can you adjust your retirement plan to account for inflation?

One simple way: stress-test your plan.

You can run a retirement projection with higher inflation scenarios (say, 4% to 5% instead of the traditional 2%) to see how long your savings would last. At Advance Capital Management, we use software that provides realistic projections based on a range of factors, from your specific goals to where you live.

If you’re already retired, it never hurts to revisit your withdrawal strategy. And if you’re following the 4% rule, consider whether that rate is still sustainable under rising costs. You may need to withdraw less in early years, or use a flexible withdrawal strategy that adjusts annually based on market performance and inflation.

Last but not least, keep an emergency buffer. Rising costs can mean larger-than-expected bills. Having 6–12 months of cash reserves set aside gives you flexibility.

What investments can help protect against inflation?

A well-diversified portfolio is a good defense.

While it often makes sense to invest more conservatively as you near retirement, it’s still important to maintain exposure to stocks. Historically, stocks have outpaced inflation better than bonds.

Additionally, some asset classes are designed to help offset inflation. Here are a few that tend to hold up well:

• Dividend-paying stocks: Companies with a strong history of raising dividends can provide rising income over time.
• Treasury Inflation-Protected Securities (TIPS): U.S. government bonds that adjust with inflation.
• Real Estate Investment Trusts (REITs): Real estate often increases in value with inflation and provides income.
• Commodities or commodity funds: These can act as inflation hedges but are more volatile and not suitable for all investors.

Before making changes, talk to a financial adviser. What works in theory might not suit your personal goals or risk tolerance.

Should you adjust your retirement budget because of rising costs?

Yes. But honestly, this is something you should probably do anyway.

Even small spending tweaks can have a meaningful long-term impact.

• If you’re nearing retirement, start by estimating your future expenses in detail.
• If you’re already retired, track your monthly spending, especially in areas like groceries, gas, utilities and health care.

If your spending is creeping up, look for ways to reduce waste or shop smarter.

What role does Social Security play in fighting inflation?

Social Security includes an annual cost-of-living adjustment (COLA), but it may not always keep pace with true living costs.

For instance, the COLA was 3.2% in 2024, while senior expenses rose 4.8%, according to the Senior Citizens League.

If you haven’t claimed benefits yet, you might consider delaying Social Security, as it can boost your monthly payment significantly. For every year you wait past full retirement age (up to age 70), your benefit increases by about 8%. This higher base benefit also results in larger dollar increases when COLAs are applied.

Still, the best time to claim Social Security depends on personal factors, such as your assets, income needs, health and marital status.

What else should you consider?

• Review your Medicare coverage annually. Shop around during open enrollment to avoid overpaying.
• Plan for long-term care. Exploring your options, from self-funding to long-term care insurance, can help preserve your savings if care is needed later in life.
• Rethink your housing. Downsizing, relocating or refinancing could help reduce fixed expenses and free up cash.

How can a financial adviser help?

A potentially costly mistake? Trying to navigate rising costs alone.

With it comes to inflation in retirement, a financial adviser can:

• Help you model different inflation scenarios
• Align your investment portfolio with long-term goals
• Evaluate your withdrawal strategy for sustainability
• Build a customized income plan that adjusts over time

Worried about inflation eating into your retirement? Let’s talk.

An Advance Capital Management adviser can help you build a plan that works for you now and into the future. Schedule a complimentary retirement consultation today.