How to Avoid Outliving Your Money in Retirement

Debbie Reslock

By Debbie Reslock | May 29th, 2018

There’s one prediction in life that’s impossible to make, at least with any certainty. And that’s how long we’re going to live.

But unfortunately, we’ll need a pretty good estimate because that’s also how many years we’ll be in retirement.

Although we may be looking forward to a well-earned and rewarding career break, outliving our money can turn any dream into a nightmare. The good news is there are several online tools and cautionary suggestions to help us calculate where we are and how best to sidestep the wrong path.

What will your retirement look like?

For as complicated a decision as this may be, it really comes down to two simple concepts – how much money can you count on coming in and how much money do you plan on going out. More of the first than the second? Enjoy! But if you’re going to come up short, decisions you make today can lessen the sting.

Of course, the best option was to start saving when you were in your twenties. But since life often got in the way, and there’s no going back, the next best step is find out where you are today, how much money you’ll need, and adjust from there.

  1. Will you maintain the same lifestyle with similar expenses as you do today?
  2. Do you expect changes that will reduce your expenses, i.e. downsizing, moving to a location with a lower cost of living or paying off a mortgage?
  3. Will your expenses increase now that you’ll have time to travel, take up new hobbies or discover other ways to enjoy a more leisurely life?

Try to be as honest and accurate as you can but one note of caution: many assume they’ll automatically save money being retired but the reality is most keep their same lifestyle. And remember, even then other expenses can still rise, like healthcare.

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Counting on your income

With fewer company pensions, most baby boomers are self-funding their retirement. Make a list of all sources, including investments, savings, annuities, insurance policies and any other items that could be converted to cash, if need be, like jewelry or other valuables whose sentiment doesn’t outweigh your need to pay the rent or take a vacation. Another source of money can be tapping into your home’s equity by taking out a reverse mortgage.

Research your social security payment options to make the decision that works best for you. Your benefits will depend on what age you claim them. The longer you can wait, the bigger your check so consider the amount for early or full retirement age and holding out until you’re 70.

How long will your funds last?

You’ll have to make an assumption about your life expectancy to estimate the years your retirement funds will need to stretch.

It’s better to be optimistic about this number because if you’re wrong, you’ll outlive your money. Many retirees settle on 20 years or their average life expectancy but you need to adjust these estimates for your overall health and family genetics.

A less risky way is to pick an age that has the best chance of ensuring your money lasts at least as long as you do. By choosing 95 or even 100 and adjusting spending and withdrawal rates accordingly, people feel safe that they’re covering their bets. And if they leave a little early, there will be money for their heirs.

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How much will you need?

There are several online calculators that estimate what you’ll want put away but they’re typically based on common rules of thumb. Use these only as a place to start as everyone’s retirement plan should be personalized. Here are a few of the more popular philosophies.

  1. Save 10 times your final salary before you retire.
  2. Create your retirement budget and divide by 0.04 to define the amount of funds needed to allow for a 4% annual withdrawal rate. For example, if you think your expenses will run $30,000 a year, you would need $750,000 in retirement funds.
  3. Set aside at least $1 million. But how long this will last will depend specifically on your situation – and where you live. In a newly released report from GO Banking Rates, they illustrate how many years your $1 million will last in each state. 

What to do if you’re going to come up short?

For some, the boats talked about above have already sailed but there are still options. The two situations you have the most control over are how long you work and cutting your expenses, so start there.

Keep working

Putting off retirement delays when you’ll start living off of your savings. Some research says that every extra year worked covers up to three years in retirement.

Work, retire and then go back to work

If you’re already retired, even working part-time can ease the reliance on saved funds. Many retirees return to the workforce full time and try an encore career or going into business for themselves.

Cut your expenses

Find the biggest drain and see if there’s room to save. Are your housing costs too high? Are you over-treating yourself to a lifestyle you may deserve but can’t afford? Prioritize what can and can’t be cut.


The best laid plans often go awry

There’s no way to plan how we’ll pay for our future without basing it on a set of expectations. But be prepared for situations like below that can often come along. If they result in more money, you can celebrate. But if it means less, you may need to reset your withdrawal rate.

Facing your biggest financial challenge

Retirement can be an amazing journey but it’s not free. In fact, many advisors refer to it as one of the biggest financial challenges you’ll most likely ever face. It’s not a set-and-forget plan and you’ll need to revisit your strategies annually and make adjustments whenever needed.

Yet it’s important to remember that retirement is about much more than money. You don’t want to be short on funds but don’t overlook what’s really important. Use this time to keep learning, recognize the joys of life and be thankful for what you do have.

Don’t forget what matters to you most. Giving back to others or spending time with those you love doesn’t require a large budget. Financial planner and author Robert Laura sums it up perfectly. “Running out of money pales in comparison to running out of family, friends, good health and time.”

We’ll need both money and people when we retire. Here’s hoping that with a life well lived and a little planning, we’ll never run out of either.

Debbie Reslock

Debbie Reslock

Debbie Reslock writes about and for the baby boomer and 55+ market, including the amazing journey of aging itself. Her blog, The Third Act, can be found at


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