The New Retirement Math: How Do You Keep Your Retirement Paycheck Growing When Prices Continue Higher Faster?

November 1, 2025

John Browning, MBA and CSA® | CEO, Principal

When Marjorie ordered her usual morning latte, she did a double-take; the price was higher . . . again.  This was her one thing, however small that she really enjoyed a coffee at her local coffee shop, a quiet moment alone reading a book but even that was getting more expensive.  Her Social Security check would arrive on schedule, but it wouldn’t stretch quite as far. That small moment captures something much bigger: even when the headline inflation we see in the news slows, the cost of living rarely goes backward. For retirees and those nearing retirement, that’s the real challenge. Of course, it impacts all of us, but people in or nearing retirement most of all. 

The Bottom Line at the Top:

With inflation still high in key spending areas and interest rates drifting lower, retirees need portfolios that deliver both income and growth. A disciplined mix of diversification, asset allocation, and sector rotation remains the best way to protect purchasing power and sustain financial independence over a long retirement.

Understanding Your Personal Inflation Rate

The Social Security Administration’s 2.8% cost-of-living adjustment (COLA) for 2026 raises the average monthly benefit to about $2,064—a modest $56 increase. Yet retirees often experience inflation that runs hotter than official figures suggest. Over the past year, healthcare services rose 3.9%, health insurance 4.2%, home insurance 7.5%, and meat and fish nearly 6%.

Meanwhile, Medicare Part B premiums are projected to rise from $185 to $206.50 next year, taking up nearly 40% of that COLA increase. The lesson is clear: while income may adjust, spending power continues to erode in real terms. Understanding your personal inflation rate—the pace at which your expenses rise is essential to sustaining your lifestyle.

Longevity Means Growth Still Matters

Retirement today can last three decades or more. Those reaching age 65 can expect to live into their mid-80s on average, and many will live well into their 90s. That’s good news, but it amplifies “longevity risk,” the danger of outliving one’s assets.

This is why even in retirement, growth-oriented investments like stocks remain vital.  Income-generating assets provide potential stability and cash flow, but carefully selected growth stocks help ensure your portfolio keeps pace with inflation and time. Think of your portfolio as having two engines: the income engine provides stability, while the stock engine delivers the thrust.

The Cash Trap in a Lower-Rate World

With inflation moderating and the Fed expected to continue trimming rates, retirees should prepare for lower yields on cash and money-market holdings. While keeping some money for 6–12 months of expenses and emergencies remains prudent, holding too much in cash can significantly undermine purchasing power.

Beyond that short-term cushion, a blend of high-quality, income-producing assets structured specifically for your situation creates a resilient income stream that balances that against your growth engine.

Other Popular Headline Traps: 

Gold, “Debasement,” and the Diversification Mindset

Gold’s remarkable 60% climb this year, past $4,300 per ounce, reflects investor anxiety about government debt, inflation, the dollar’s long-term strength and frankly, the fact that the United States commandeered an entire nation's gold reserves when they issued the sanctions against Russia causing other sovereign nations to repatriate gold to hold it closer to home, further restricting supply.   While gold can serve as a portfolio diversifier and hedge, its track record over complete cycles lags that of equity securities; further, it generates no income and often incurs holding and protection costs.  

The key is not to view gold or any single asset as the answer, but rather as one piece of a diversified strategy. The real goal is balance: blending and repositioning assets that move differently through changing economic cycles.

Here is what gold prices look like over time.  Sometimes it works for you, other times not so much, as you can see below, and keep in mind the storage and protection costs involved with owning gold or any precious metal. 

Volatility, Trade Tensions, and the Ongoing Shutdown

Markets have grown choppier as U.S.–China trade tensions flare again and the federal government shutdown stretches toward record length. While headlines can feel unsettling, history shows that markets do well once uncertainty clears.

During the 2018–2019 shutdown, the S&P 500 rose more than 9%, and research shows that while shutdowns can dent GDP by about 0.1–0.2% per week, the long-term effects on markets are minimal. Still, the current situation could slow data releases and add near-term volatility, reminding us of the importance of diversification and a disciplined portfolio structure.

Things to Do NOW

1.      Measure Your Personal Inflation RateTrack your own spending in categories that matter most—healthcare, housing, insurance, and food—and plan using those figures, not national averages.

2.      Balance for Income and GrowthConstruct a diversified mix of quality bonds, dividend-paying stocks, and select alternatives. Consider “bucket strategies” that match assets to time horizons—short-term cash (6–12 months), mid-term income sources, and long-term growth positions.

3.      Stay Steady Through Volatility

Short-term market pullbacks are normal and can present an opportunity. Historically, higher volatility has preceded more substantial returns. Maintaining perspective helps avoid costly emotional decisions.

4.      Diversification as a DisciplineDiversification, asset allocation, and sector rotation are the fundamental tools for building resilience. By spreading exposure across multiple return drivers—stocks, bonds, commodities, and global markets—you reduce reliance on any single factor or asset class.

12–18 Month Outlook

• Inflation: Likely to hover around 3%, continuing to pressure retiree budgets.

• Rates: Gradual Fed cuts will lower cash yields; attractive bond opportunities remain.

• Equities: Valuations are elevated; expect moderate returns with more volatility.

• Bonds: Continue to offer balance and income; focus on quality and moderate duration.  There may be better alternatives for the income portion of your wealth management plan.

• Alternatives: measured allocations to commodities can enhance inflation protection and growth.

• Policy risk: Extended shutdowns and trade tensions may add noise but are unlikely to alter long-term fundamentals.

• 
  

Final Thoughts

Retirement success isn’t about how much you’ve saved; it’s about what that savings can do for you over time and how much you keep in your own portfolio rather than sending it to Uncle Sam.  Inflation, lower yields, and longevity mean your financial plan must evolve.

Think of your portfolio as a well-built home: income and bonds form the foundation, stocks build the structure, and inflation hedges reinforce the roof. When all parts work together, you can weather economic storms with comfort and confidence.

Nothing in this communication should be construed as personal advice & past performance is no guarantee of future results. There is a risk of loss associated with investing. No representation or implication is made that any methodology or system will generate profits or ensure freedom from losses. Guardian Rock LLC and its affiliates are fiduciary investment advisors. Please consult with us before making investment decisions and/or implementing the strategies and tactics we discuss in any of our publications.