Inflation has been a major concern for Americans in recent years, particularly since the COVID-19 pandemic directly contributed to a massive spike in higher costs for goods and services.
Personal finance author and media personality Suze Orman urges people planning for retirement to take steps to to ensure their retirement savings and Social Security strategies are constructed to withstand further inflation developments in 2025 and beyond.
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In the wake of the pandemic, supply chain disruptions, rising commodity prices and federal stimulus programs caused the annual inflation rate to increase from 1.7% in February 2021 to a peak of about 9% in June 2022.
Since then, largely attributed to the Federal Reserve’s subsequent interest rate hikes, the inflation rate calmed to 2.9% by December 2024.
Related: Suze Orman warns U.S. workers on Social Security, 401(k) change
Currently, uncertainty around fiscal policy, energy costs and rising credit card debt raise concerns once again about the unpredictability of inflation in 2025 — and it is important to note that retirement savings purchasing power can be impacted when the cost of living increases.
Orman encourages people saving and investing for retirement —and planning for Social Security — to approach the future with an eye toward finding ways to mitigate the effects of rising inflation.
A retired couple is seen holding hands and walking on a beach. Suze Orman advises people to ensure that their retirement plans account for inflation rate increases.
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Suze Orman urges inflation planning for Social Security
Orman warns her readers that she does not expect to see the days of ultra-low inflation rates return any time soon. She believes a long-term norm of around 3% is a fair rate for which one should prepare a retirement planning strategy.
“Plan on many costs being double what they are today,” she wrote. “A 3% annual inflation rate might not sound so bad, but if you compound that 3% every year for 25 years, it means that what costs you $100 today will cost you more than $200 in 25 years.”
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Orman explains that a person’s age presents different factors to consider when planning for retirement and Social Security benefits. That is, a 35-year-old has one set of realities to consider — and those are quite different than they are for one who is 65.
Specifically, Orman clarifies that in order to get the most out of Social Security, one must understand and plan for the fact that the federal program carries with it an annual inflation change, known as the Cost of Living Adjustment (COLA). In 2024, the Social Security COLA was 3.2%. In 2025, it is 2.5%.
Practically speaking, this means that beginning in January 2025, Social Security recipients saw an increase in their monthly paychecks of 2.5%.
Orman writes that another vital fact to understand is that the COLA is not only credited to people who are currently receiving their Social Security benefits.
“Once you turn 62, the COLA is added to your benefit, even if you are delaying starting to collect,” Orman explained. “That adds to the value of your eventual benefit.”
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Suze Orman recommends investing in stocks during periods of inflation
Even if inflation rates increase, Orman suggests continuing to invest in the stock market. She makes the point that bonds and cash have proven to have a difficult time keeping pace with inflation, while over the long term, stocks have demonstrated the ability to perform.
“Only stocks have a track record of earning more than inflation,” the personal finance author wrote.
Orman acknowledges that stocks, of course, experience periods of time where they lose value and that one’s retirement portfolio ought to take that reality into consideration.
Those who are young, especially, have more time to absorb the loss of share values during bear markets. People closer to retirement age would be wise to be less invested in stocks.
Orman suggests a mathematical rule one can reasonably follow when planning a blend of stocks, bonds and cash for retirement savings.
She says a person can subtract their age from 100. The resulting number can always be used as the percentage to consider keeping invested in stocks.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
