I spoke with my aunt in Florida last week, and she summed it up perfectly: "My Social Security check goes up a little each year, but my expenses go up a lot." She's not wrong. The purchasing power of fixed-income Americans has been steadily eroding, despite the cost-of-living adjustments (COLAs) that are supposed to keep pace with inflation.
This is where the stimulus debate gets complicated. Those pandemic-era stimulus checks — while helpful in the moment — contributed to the inflationary pressures we're experiencing now. It's a classic economic catch-22: provide immediate relief and risk longer-term inflation, or prioritize price stability at the cost of short-term hardship.
The Social Security Administration finds itself caught in the middle of this economic tightrope walk. The 2025 COLA was 2.3% — significantly lower than the 3.2% adjustment in 2024 and nowhere near the 8.7% increase in 2023. Meanwhile, many seniors report their actual living expenses increasing at rates far exceeding these adjustments.
"What we're seeing is a fundamental disconnect between how inflation is measured and how it's experienced by retirees," explains Dr. Maria Hernandez, an economist specializing in retirement security at Boston University. "Healthcare costs and housing — two major expenses for seniors — have outpaced general inflation for years."
For investors, these dynamics create both challenges and opportunities. Financial services companies like Prudential (PRU, $123.45, +0.7%) and healthcare REITs such as Welltower (WELL, $97.23, +1.1%) have positioned themselves to benefit from the aging demographic trends, regardless of how the stimulus debate plays out.
But for the 70+ million Americans who depend on Social Security benefits? The math isn't working in their favor right now. And with Congress deadlocked on most fiscal issues, meaningful reform seems unlikely before the next election cycle.
In the meantime, financial advisors are increasingly recommending that retirees — and those approaching retirement — reassess their income strategies. The old rule of thumb about needing 70-80% of your pre-retirement income might need serious recalibration in this inflationary environment.
I know I've certainly adjusted my own retirement planning accordingly. Have you?
