The 2.8% COLA Reality Check: Tracking Social Security Gaps in Your FIRE Plan

tax_tina · March 28, 2026, 3:24am

If you’re planning to retire early and counting on Social Security to bridge part of your expenses, here’s the sobering math from 2026: beneficiaries got a 2.8% cost-of-living adjustment, which sounds reasonable until you realize that translates to just \ more per month for the average retiree. But wait—Medicare Part B premiums jumped from \ to .90. That’s an \ increase, leaving retirees with a net gain of only \ per month after Medicare takes its cut.

For those of us in the FIRE (Financial Independence, Retire Early) community, this isn’t just retiree news—it’s a wake-up call about the reliability of Social Security as part of your long-term plan.

Why FIRE Planners Should Care About 2026 Policy Changes

The FIRE movement has exploded in popularity, with interest jumping from 24% to 37% of Americans in just one year. The core principle—saving 25x your annual expenses and withdrawing 4% per year—is elegant in theory. But it assumes a lot of things stay constant, and Social Security policy is definitely not one of them.

Here’s what changed in 2026 that matters for your planning:

2.8% COLA increase: Sounds good, but it’s barely keeping up with inflation
Medicare premiums up 9.7%: That’s 3x faster than the COLA increase
Full retirement age creeping up: Now 67 for anyone born in 1960 or later
Trust fund depletion by 2033: That’s only 7 years away, and when it runs dry, benefits could be cut by 20-30%

If you’re planning to retire at 45 and live to 90, that’s 45 years of depending on a system that’s showing cracks. Early claiming at 62 already reduces benefits by up to 30%, and if you layer policy cuts on top of that, your “guaranteed” income looks a lot less guaranteed.

The Pre-Medicare Healthcare Gap: The Biggest FIRE Risk

One of the most underestimated risks in early retirement is healthcare costs between when you retire and when Medicare kicks in at 65. If you retire at 45, that’s 20 years of private health insurance. At 55, it’s still 10 years. Current estimates put individual coverage at -,500+ per month depending on your state, health status, and coverage level.

Here’s the brutal reality: healthcare costs have been inflating at 6-7% annually. If you retire today at 45 with a ,000/month health insurance premium, by the time you hit Medicare eligibility, you could be paying ,800/month. Over those 20 years, you’ll spend somewhere between ,000 and ,000 just on health insurance premiums—and that’s before deductibles, copays, and out-of-pocket maximums.

This is why FIRE targets have been climbing from -1.5M to -2.5M. That extra million? A lot of it is healthcare buffer.

Three Ways to Model Social Security Uncertainty in Beancount

So how do we actually track this in Beancount? Here are three strategies I use with clients:

1. Scenario Modeling with Multiple Projections

Create separate accounts or use metadata to track different Social Security scenarios:

Optimistic: Full benefits at your projected FRA
Base case: 75% of projected benefits (accounting for potential cuts)
Conservative: Zero Social Security, or only count it starting at age 70

By tracking these separately, you can run projections and see how sensitive your retirement date is to policy changes.

2. Healthcare Gap Tracking

Create a dedicated expense account for pre-Medicare healthcare and project it out with 6-7% annual inflation. In Beancount, you might structure it like:

2026-03-27 * "Healthcare insurance premium - Early Retirement Fund"
  Expenses:Healthcare:Insurance  1200.00 USD
  Assets:Investments:RetirementFund

Then use metadata to tag these as “healthcare gap” expenses so you can query and forecast them separately.

3. Safe Withdrawal Rate Adjustments

The traditional 4% rule assumes a 30-year retirement. If you’re retiring at 45, you need to plan for 45+ years. That might mean dropping to a 3% or 3.5% withdrawal rate—which means you need to save even more.

Track your withdrawal rate assumptions in Beancount comments or metadata, and periodically recalculate based on policy changes, portfolio performance, and spending reality.

Let’s Share Strategies

How are you handling Social Security uncertainty in your FIRE planning? Are you:

Treating Social Security as a bonus rather than a guarantee?
Building bigger healthcare buffers into your FIRE number?
Using Beancount queries to model different policy scenarios?
Tracking policy risk with metadata or custom accounts?

I’d love to hear how others in the community are stress-testing their retirement plans against the 2026 reality of shrinking COLAs and rising costs.

Sources:

accountant_alice · March 28, 2026, 3:25am

This topic hits close to home—I’ve been modeling exactly this scenario in my Beancount setup for the past year.

The math you laid out is stark, and it’s why I’ve completely restructured how I think about Social Security in my FIRE planning. I now treat it as “bonus money” rather than a foundational assumption. Here’s my approach:

Separate Accounts for Guaranteed vs At-Risk Income

In my Beancount ledger, I maintain two distinct income projection accounts:

Income:Retirement:Guaranteed - This includes only rental income, dividend income from taxable accounts, and other streams I directly control
Income:Retirement:SocialSecurity:AtRisk - This is where I model Social Security with three sub-accounts for optimistic/base/pessimistic scenarios

The key insight: I only count the “Guaranteed” bucket when calculating whether I’ve hit my FIRE number. Social Security is gravy.

The Pre-Medicare Healthcare Gap Is Real

Tina, you mentioned -,500+/month for individual coverage, and I can confirm that’s accurate. I’m currently modeling ,200/month for myself starting at age 45 (my target early retirement), and I’m projecting 7% annual healthcare inflation because that’s what the data shows.

When I run the numbers, this is terrifying: over 20 years (age 45-65), even with conservative 6% inflation, I’m looking at roughly ,000 in healthcare premiums alone. That doesn’t include deductibles, copays, or unexpected medical events.

This single line item added ,000 to my FIRE target. My original goal was \M. After properly modeling healthcare, I’m now targeting .1M minimum, and honestly considering .3M to sleep better at night.

BQL Query for FIRE Number with Healthcare Buffer

For anyone curious, here’s a simplified version of the Beancount Query Language (BQL) query I use to track my “FIRE readiness” accounting for healthcare:

SELECT 
  sum(position) as "Net Worth",
  sum(position) * 0.035 as "Safe Annual Withdrawal (3.5%)",
  (sum(position) * 0.035) - (1200 * 12) as "After Healthcare"
WHERE 
  account ~ "Assets:(Investments|Banking)" 
  AND NOT account ~ "Assets:Investments:401k"

This query:

Calculates my net worth from investable assets
Applies a 3.5% safe withdrawal rate (more conservative than 4% for longer retirement horizon)
Subtracts my projected annual healthcare costs (,200/month = ,400/year)

The “After Healthcare” number is what I actually have available for living expenses. It’s a sobering reality check.

The Trust Fund Depletion Timeline Is No Joke

The 2033 depletion date is only 7 years away. That’s not abstract future—that’s right around the corner. And when it happens, benefits don’t go to zero, but they’ll likely be cut by 20-30% unless Congress acts.

If you’re modeling Social Security in your plan, I’d strongly recommend using 70-75% of the projected benefit as your base case assumption. And if you want to be conservative (which I do), plan for zero and be pleasantly surprised if you get something.

The bottom line: \M used to feel like “enough” for FIRE. In 2026, with healthcare reality and Social Security uncertainty, it’s starting to feel like the bare minimum.