3 Key Economic Signs That Could Shape Your Retirement in 2025
Written by
Sarah Li Cain
Edited by
Amber Barkley
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Retiring this year — or really soon? Making the usual moves, like reassessing your portfolio allocation, getting clear on your retirement budget and planning how you’ll spend your days, are important.
But what’s also important is to expect the unexpected. And in 2025, you may face some challenges that could affect your retirement. Here are three challenges that could shape your retirement this year.
Inflation
You’ve probably seen prices going up in the past few years, such as at the grocery store. Although inflation is a given, it’s still above what the experts would like it to be. Although the Fed has dropped rates in an attempt to combat inflation, it’s not super promising.
For one, the consumer price index (CPI) had risen 2.9% year-over-year in December 2024 and rose 3% year-over-year in January 2025. What’s more, a December 2024 Bank of America report forecast that high prices for goods are likely to be the norm for the next while. Analysts in the report also predict a freeze in rate cuts from the Fed.
As a retiree, inflation can have a huge effect on your day to day life, especially for those living on a tight and fixed income. It could make it harder to afford goods and services, like healthcare and groceries. If you need to withdraw more from your savings, it could erode your nest egg much faster.
While there’s not much you can do to change inflation, you can try to protect your nest egg by putting some of your savings into Treasury inflation-protected securities or similar types of investments. Taking on a part-time job to increase your income or adjusting your budget could also help.
Social Security Uncertainty
Those who receive Social Security payments will only receive a 2.5% cost-of-living adjustment (COLA). In other words, your paycheck will only go up by 2.5%, which isn’t necessarily keeping up with the increase in prices you see all around you.
You also guessed it: The increase doesn’t seem to be keeping up with inflation.
While Social Security can help to pay many of your expenses during retirement, it unfortunately can’t be your only source of income. You will need to see how you can keep up with the cost of living with other accounts, like an IRA and your employer-sponsored retirement account.
Working with a reputable financial advisor can help you to see what you can do to ensure you have enough money to live comfortably during retirement.
Investment Returns
Market volatility is nothing new, and your investment portfolio could go up and down at any time. This year could see more uncertainty, with bond markets expected to see cuts and businesses responding to changes like tariffs and other concerns.
While this volatility doesn’t mean you should move all of your nest egg into more “stable” sources, it does mean making plans to be prepared.
If you’re not retired yet and can afford to, consider putting more away in investment accounts to give it time to grow. Those between the ages of 60 and 63 may be able to take advantage of a “super catch up” contribution to their 401(k) plans, up to $11,250 over the standard limit of $34,750.
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