Since 2010, Social Security benefits have lost 20% of their buying power, according to The Senior Citizens League. After 14 years of annual cost-of-living adjustments, the average retiree can buy 20 cents less for every dollar they spent in 2010.
For every $100 of groceries back then, they're getting about $80 worth today. This is the average Social Security payment for retired workers:
Now stack that against a 2.8% Social Security COLA for 2026 while Medicare Part B premiums jumped 9.7% to $202.90 a month (the first time they've ever crossed $200), and the problem starts to become clear. If you're a retiree, the numbers are not in your favor.
Inflation is a fact of economic life. The Fed actually wants roughly 2% inflation per year; they consider it a sign of a healthy, growing economy. For people in their working years, modest inflation is manageable. Wages drift up, you earn more, and life moves on.
But once you stop working and flip from accumulation to distribution, that same inflation can quietly chew through your savings like termites in a floor joist. And in keeping with that metaphor, you don't notice until you're standing in the hole.
If you're a physician nearing retirement, or already there, inflation is important for your consideration.
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Your Spending in Retirement Is Different From Everyone Else's
The CPI (Consumer Price Index) measures what a basket of goods costs for the average urban worker. But retirees don't spend like average urban workers. They spend more on healthcare and housing, two categories that have consistently outrun general inflation for years.
According to the U.S. Bureau of Labor Statistics, older Americans direct roughly 36.5% of their budget toward housing and 15.6% toward healthcare — nearly double the health spending share of the general population.
That's more than half the budget in just two categories, both of which tend to inflate faster than the headline CPI number.
This is the crux of why Social Security's annual cost-of-living adjustment so often fails to keep pace. The COLA is pegged to the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers), which weighs things like commuting costs, work clothing, and employment-related expenses that most retirees simply don't buy anymore.
Advocates have pushed for years to switch the calculation to the CPI-E (Consumer Price Index for the Elderly), which weighs medical care, housing, and utilities more heavily. Congress has discussed it, but it remains just that.
The result? In the 2010s, only 40% of annual COLAs beat inflation. Through the 2020s so far, only one out of five has.
Healthcare and Inflation
For physicians, this is familiar territory…professionally speaking.
Medical care costs rose 2.85% year-over-year as of January 2026, compared to general inflation of 2.4%. That gap may seem small, but compounded over 20 or 30 years, it builds a cost structure that grows faster than Social Security adjustments and faster than most conservative portfolio returns.
Here are the Medicare numbers for 2026:
- Medicare Part B standard premium: $202.90/month — up from $185 in 2025, a 9.7% jump
- Part B annual deductible: $283 — up $26 from 2025
- Part A inpatient hospital deductible: $1,736 — up $60
- Health-related cost inflation: projected at 5.8% long-term — more than double the 2.8% Social Security COLA
The $56 average monthly COLA bump in Social Security for 2026 sounds decent until you realize the Part B premium increase alone swallowed about a third of it. And this is the third straight year that Part B premiums have risen faster than the COLA.
If you're a high-earning physician with income-related Medicare surcharges (IRMAA), the bite is even bigger. At $109,001–$137,000 in individual income, your Part B premium is $284.10 in 2026, up from $259 in 2025.
And that's based on your 2024 income — that two-year IRMAA lookback can come as a nasty surprise in the first years of a high-income retirement.
From a planning standpoint, health-related cost inflation has averaged 5.5% annually for Part B premiums from 2005 to 2024, while Social Security COLAs averaged just 2.6% over the same stretch. That is not a one-time anomaly.
Also read: Changes to Medicare: What 2025's Overhaul Really Means for Your Care
Why Retirees Feel Inflation More Than Workers
A 2024 Boston College Center for Retirement Research study took a careful look at this and found two main reasons retirees get hit harder than people still working:
Income that doesn't keep up
Workers' wages, even if they lag inflation by a year, eventually catch up. Retirees drawing from pension income don't get that.
Private sector DB pensions typically offer no cost-of-living adjustments at all. Even government pensions, which often do include COLA provisions, are typically capped (commonly at 3%), which means they fall behind in any inflationary environment above that threshold.
Less fixed-rate debt as a cushion.
This one surprises people. Inflation actually helps anyone carrying a fixed-rate mortgage, because the real value of that debt shrinks as prices rise. Your mortgage payment stays flat; everything else gets more expensive.
Most near-retirees still have a mortgage. Most retirees have paid theirs off. That's normally great news — but during an inflationary period, it means they lose the buffer that fixed-rate debt provides.
Social Security, to its credit, is fully inflation-indexed. But as we've seen, the indexing mechanism itself may not accurately reflect what retirees actually spend money on.
And for retirees who rely heavily on Social Security, a 20% cumulative loss in buying power since 2010 is very real money.
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The Retirement Wealth Gap
Not all retirees face this the same way, and the Boston College research makes that clear too.
Top-wealth households (those with significant equity holdings and business income) tend to weather inflation better. This is because stocks and business ownership tend to grow with, or ahead of, inflation over time.
The inflation that eats away at a fixed pension benefit doesn't erode an equity portfolio the same way.
On the flipside, top-wealth retirees often end up with a bigger drop in consumption relative to their lower-wealth peers who live primarily off Social Security. Why? Because Social Security is fully indexed.
A retiree living almost entirely on Social Security gets a check that at least tries to keep pace. A wealthy retiree with a large pension, bond-heavy portfolio, and limited inflation protection can see the real value of their income stream decline faster.
This is why “I have a lot of money” is not, on its own, a complete inflation strategy.
The Worry Numbers Are Getting Serious
The survey data on retiree confidence is…unsettling to say the least. From Schroders' 2025 US Retirement Survey of 1,500 investors nationwide, including 373 retirees, we learn that:
- 92% of retirees say they're at least somewhat concerned about inflation devaluing their assets (up from 89% in 2024)
- 84% wish they could better protect their savings from inflation's effects
- 62% don't know how long their money will last
- 45% say their expenses in retirement are higher than expected
- Only 40% believe they have saved enough for retirement
Meanwhile, the 2025 Allianz Annual Retirement Study found that 64% of Americans worry more about running out of money than dying. Yikes.
The evidence proves that their worries aren't unfounded. Inflation at 3% doesn't feel catastrophic in any given year, but over a 20-year retirement, it cuts your purchasing power nearly in half. And MIT's AgeLab estimates retirement can span roughly 8,000 days — more than 21 years.
That's a long time for price increases to compound.
Also read: Backdoor Roth IRA 2026: A Step by Step Guide with Vanguard
How Tariffs can Change Your Retirement
Tariffs are the wrinkle that wasn't taken into account for most retirement projections until very recently.
Grocery prices are still notably higher than pre-pandemic levels, and trade policy uncertainty has made forecasting harder.
The U.S. January 2025 CPI came in at 3% year-over-year, with shelter up 4.4%, transportation services up 8%, and food costs up 2.5%.
Tariff-driven inflation hits retirees particularly hard because it tends to run hottest in the categories they buy the most — food, manufactured goods, and products with significant import exposure.
And unlike a wage earner who might get a raise to offset higher costs, a retiree drawing from a fixed income stream doesn't have that advantage.
What Physicians Nearing Retirement Should Think About
Here are a few practical considerations that can help frame the conversation with your financial advisor:
Your income sources matter as much as the amount
Social Security income is inflation-indexed (imperfectly, but indexed nevertheless). Pension income from most private employers is not.
DC plan withdrawals are only as inflation-resistant as your portfolio allocations. If you're planning to pull primarily from a bond-heavy portfolio, know that rising prices cut into the real value of that income over time.
Learn about investing Beyond Stocks and Bonds: Why Home Equity Could Be a Smart Addition to Your Investment Portfolio
Sequence of returns and inflation can gang up on you
Fidelity research illustrates how a market downturn in the early years of retirement, combined with continued withdrawals, can permanently impair a portfolio. Layer elevated inflation on top of that, and the damage compounds.
This is why even large nest eggs can turn out to be inadequate if they're poorly constructed.
Model multiple inflation scenarios.
Running your retirement calculations at 2.5% inflation is fine as a baseline. But stress-testing at 4–5% (financial planners typically model 2%–5% scenarios) shows whether your plan has slack in it.
According to Fidelity's Monte Carlo simulation, a couple with $1 million withdrawing $50,000 annually sees their odds of not running out of money drop from 77% at 2.5% inflation all the way to 41% at 5% sustained inflation.
Healthcare spending is back-loaded.
A healthy 65-year-old might spend $5,000–$7,000 annually on premiums, deductibles, and out-of-pocket costs and feel like it's manageable.
By 75, managing two or three chronic conditions, that number can easily exceed $12,000–$15,000. And with Medicare Advantage's out-of-pocket maximum in 2026 being $9,250 in-network, people hit this cap more often than they'd expect.
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HSA dollars are gold for physicians who still have access.
The 2026 HSA contribution limit for self-only coverage is $4,400, with a $1,000 catch-up allowed for those 55 and older. Invested and allowed to grow, those dollars come out tax-free for qualified medical expenses at any age. Given that healthcare is the single largest source of inflation risk in retirement, a dedicated healthcare reserve built on HSA contributions is one of the most efficient tools on the board.
Learn more: HSA: The Ultimate Retirement Account
Equities remain important.
The instinct to de-risk by moving heavily into bonds as you approach and enter retirement is understandable. But bonds don't protect against inflation.
On the contrary, they suffer from it. As Fidelity's Naveen Malwal notes, historically, stocks have maintained positive returns even during elevated inflation periods because companies can often pass on rising costs.
A retirement portfolio with zero equity exposure is one that's conceding ground to inflation every year.
The IRMAA lookback can bite.
Physicians who retire from high-income practices need to plan carefully around the two-year income lookback that determines Medicare surcharges.
A high-income year right before retirement can result in paying the top IRMAA tier for Part B in the first year or two of retirement — surcharges that add $81.20–$487.00 per month in 2026 on top of the base premium.
Roth conversions and income timing strategies need to account for this.
Also read: The $3,000 Mistake 585,000 Retirees Made Last Year (And the 10-Minute Fix)
Inflation Isn't Going Anywhere
The Department of Labor's December 2024 Report to Congress on the Impact of Inflation on Retirement Savings concluded that inflation affects retirement savings on multiple dimensions, and small reductions in savings or purchasing power compound over a lifetime.
You worked for decades building the financial foundation that retirement sits on. Understanding exactly how inflation erodes that foundation (and which parts of your plan are most exposed) is the kind of analysis worth doing now, rather than later, after prices have already done their damage.
A 50-cent loaf of bread in 1980 costs $4–$5 today. That's about 40 years of inflation. If you're retiring in 2026 and planning for a retirement that lasts into the 2050s and beyond, your retirement plan should account for the version of inflation that retirees actually experience.
How have you hedged against inflation in your own retirement planning? Drop your approach in the comments below. The Physicians on FIRE community has some of the sharpest financial minds in medicine, and this is exactly the kind of practical, real-world thinking that helps everyone make better decisions.
In case you missed it: The Physician's Guide to a Regret-Free Retirement
Frequently Asked Questions
Does inflation affect retirees more than workers?
Yes, and for two concrete reasons. First, most retiree income streams — pensions, annuities, portfolio withdrawals — don't adjust upward the way wages eventually do. Second, retirees spend a disproportionate share of their budget on healthcare and housing, two categories that have consistently outrun headline CPI for decades. Social Security is inflation-indexed, but imperfectly — since 2010, it's lost 20% of its buying power in real terms.
Why doesn't Social Security keep up with inflation?
The COLA calculation uses the CPI-W, which tracks spending patterns for urban wage earners — not retirees. It weights commuting, work clothing, and employment costs that most retirees don't have, while underweighting healthcare and housing, which eat up more than half a retiree's budget. Advocates have pushed for the CPI-E (Consumer Price Index for the Elderly), but Congress hasn't made the switch.
How much have Medicare premiums increased compared to Social Security COLAs?
A lot more than most people realize. Medicare Part B premiums averaged 5.5% annual growth from 2005 to 2024. Social Security COLAs averaged just 2.6% over the same period. In 2026 alone, the Part B premium jumped 9.7% (to $202.90/month) against a 2.8% COLA — meaning the premium hike consumed roughly a third of the average retiree's Social Security raise.
What's the best way to protect retirement savings from inflation?
No single tool does it alone. Physicians and high earners should look at: maintaining meaningful equity exposure even in retirement (stocks have historically outpaced inflation over time); building an HSA-funded healthcare reserve for the back-loaded medical costs later in retirement; stress-testing their plan at 4–5% sustained inflation, not just 2.5%; and being strategic about income timing to manage IRMAA surcharges in the first years of Medicare eligibility.
How does inflation interact with sequence of returns risk?
They're the worst combination in retirement planning. A market downturn in your early retirement years forces you to sell assets at a loss to cover expenses. If elevated inflation is running simultaneously, your purchasing power erodes on top of the portfolio damage. According to Fidelity's modeling, a retiree couple who hits a bear market early — while continuing withdrawals — may never fully recover, even if markets eventually rebound strongly.
What is IRMAA and why does it matter for physicians retiring now?
IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge added to Medicare Part B and Part D premiums for higher earners. It's based on your income from two years prior, so a high-income final year of practice can mean paying top-tier Medicare premiums right out of the gate in retirement — up to $487/month extra for Part B in 2026 alone. Careful Roth conversion planning and income timing in the year or two before retirement can reduce or eliminate this hit.
