I'm Not Counting on Social Security COLAs to Carry Me Through Retirement. Here's What I'm Doing to Combat Inflation Instead.

Just yesterday, I had cost-of-living adjustments (COLAs) on my mind. And while I realize it's an odd thing to think about in the middle of the week, I'm particularly interested in how COLAs will be handled for 2026, given the state of the economy.

In 2025, Social Security beneficiaries received a 2.5% COLA. That seemed pretty good, considering it was announced last October, as the U.S. economy was booming and inflation continued to decline. Little did anyone imagine so much could change in a matter of months.

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It's always something

There's uncertainty as to how President Donald Trump's tariff war will impact inflation. I think that's why I was so surprised to learn that recent estimates for the 2026 COLA (based on government inflation data gathered during the last administration) put the 2026 adjustment at around 2.2% to 2.3%, the lowest beneficiaries have seen in recent years.

At the same time, economists warn that if the Trump tariffs are implemented, we could see a significant boost in inflation by the third quarter of this year. And if that happens, the 2026 COLA will be reassessed and may need to be increased.

It's the uncertainty that bothers me. Will some members of Congress get their way and slash benefits like Social Security, Medicaid, and Medicare? Will COLA increases be a drop in the bucket compared to potential inflation?

What I'm doing instead

I've decided that the only thing I can control is how I handle the "what ifs." If COLAs help keep pace with inflation, that will be great. If not, I'll be OK. Here's how.

I'm assuming COLAs will fall short

In general, I think the healthy approach to living involves looking on the bright side. However, when it comes to something I can't control -- like the size of a COLA -- all bets are off. I'm going to act as though it's a foregone conclusion that COLAs can't be counted on to help fight inflation. Again, I may be wrong (and I hope I am), but just in case I'm not, I want to have something else in my back pocket.

I plan to work as long as possible

I'm lucky. I love my job and can't imagine a day when I'll want to give it up. Sure, it provides income, but it also gives my life structure and ensures I learn something new every day. It keeps me socially connected and plugged into the world as a whole. Not everyone needs a job to accomplish those goals, but I'm pretty sure I do.

I've always known that I never want to retire, and the current buzz of uncertainty in the air only makes me surer of that decision. About half the money I earn will go into new investments and continuing to build the Solo 401(k) I contribute to as a self-employed individual.

I'm moving more money into dividend-paying investments

I've never been a razzle-dazzle investor. I find companies I have faith in, buy into them, and then hold on for dear life. There's nothing sexy about my approach, but it's worked for me. As we get nearer to the day my husband retires, I realize that I need to focus more on investing in dividend-paying financial vehicles. For example:

• I've never wanted to be a landlord, but I'm investing more in dividend-paying real estate investment trusts (REITs). They allow you to buy into the real estate market without dealing with the everyday realities of being a landlord.
• I'm investing more in Treasury Inflation-Protected Securities (TIPS). TIPS are government bonds designed to protect against inflation. As inflation increases, so does the value of TIPS.

I'm keeping a close eye on our emergency fund

I'm staying on top of our emergency fund. Having a cash reserve when the market takes a dive, inflation goes into overdrive, or an unexpected event arises, means I won't have to withdraw from our retirement accounts to cover increased costs. I'm especially dedicated to not withdrawing from our retirement accounts shortly after they've lost value. Historically, there's been a significant benefit to leaving that money alone and allowing it to grow as the market improves.

By the way, our emergency fund used to exist only for actual emergencies, such as an unexpected medical bill or a blown tire on the side of the highway. As we've moved closer to retirement age, it's grown to include post-retirement issues like market dips and inflation.

Recently, my niece and I discussed an issue that concerns us both. In the middle of the conversation, I realized that we can't be sure things will go sideways. It's possible we'll be surprised, and everything will turn out better than expected. That's precisely how I feel about the countless post-retirement financial issues that could go wrong. Things may work out beautifully. However, if they don't quite turn out in our favor, I want to be prepared.

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