For many adults approaching or already in their later years, a deeply rooted concern emerges: What if I outlive my savings?
This fear isn’t unfounded. With increased life expectancies and the rising cost of living, especially healthcare, the possibility of exhausting financial resources is very real. That’s why retirement planning has become more important than ever. Careful and proactive planning can make all the difference when it comes to ensuring long-term financial security.
The good news? There are practical, effective strategies that can help you make your money last as long as you do. In this article, we’ll explore the financial challenges that come with longevity and walk through smart, actionable steps you can take now to reduce the risk of running out of money during retirement.
The average life expectancy continues to climb. Today, many people in their 60s and 70s can expect to live well into their 80s and beyond. While that’s great news for those wanting more time with loved ones and pursuing personal goals, it also increases the pressure on your finances to keep up.
Living longer means:
Without a solid strategy in place, the risk of depleting your nest egg becomes real, especially if early retirement, market volatility, or unexpected life events throw your plans off course.
Start with a brutally honest assessment of how much you’ll need to live comfortably year after year. Think about the total income you require - not just for basics like housing and food, but also for travel, hobbies, and family events. Don’t forget to factor in inflation, which erodes purchasing power over time.
Action step:
A diversified income stream is a powerful defense against outliving your money. Relying solely on Social Security or one pension may not be enough. Instead, build multiple sources of income to reduce dependence on any single one.
Consider:
Social Security: While dependable, it may not cover all expenses. Delay claiming until full retirement age or later to maximize benefits.
Pensions and Annuities: If available, these can offer predictable monthly income.
Investments: Dividend-paying stocks, bonds, and mutual funds can generate income, but come with market risk.
Real Estate: Rental income from property can provide steady cash flow, especially when managed effectively.
Part-time work or consulting: For those who enjoy staying active, continued income can be a valuable supplement.
Annuities can serve as a private pension by providing guaranteed income for life. There are many types of annuities - fixed, variable, indexed, immediate - and each has pros and cons.
An immediate annuity, for instance, can convert a lump sum into monthly payments that last as long as you live. This can be especially helpful for covering essential expenses.
Key benefits:
However, be sure to fully understand the fees, terms, and limitations of any annuity product before purchasing.
According to Fidelity, the average couple retiring at 65 will need over $300,000 to cover healthcare expenses during retirement. That doesn’t include long-term care, which can cost thousands per month for assisted living or nursing care.
What you can do:
Addressing healthcare now reduces the risk of being blindsided later and dipping heavily into your savings.
Withdrawing too much, too soon from your retirement accounts can drastically shorten how long your money lasts. A popular rule of thumb is the 4% rule—withdrawing 4% of your portfolio in the first year of retirement and adjusting for inflation thereafter. However, this isn’t one-size-fits-all.
Smart withdrawal tips:
Be flexible: Consider reducing withdrawals during down markets
Use a bucket strategy: Divide assets into short-term (cash), medium-term (bonds), and long-term (stocks) buckets to manage volatility
Withdraw from taxable accounts first, then tax-deferred, and finally Roth accounts to minimize taxes over time. Consider working with a financial advisor can help you tailor your strategy to your specific goals, risk tolerance, and tax situation.
Sometimes ensuring your money lasts means rethinking how you spend it. Downsizing your home, relocating to a lower-cost area, or eliminating debt can free up cash and lower monthly expenses.
Lifestyle changes worth considering:
The earlier you start adjusting your lifestyle, the more options you'll have to shape your financial future.
Whether you’re five years from retirement or already there, navigating longevity risk is complicated. A Certified Financial Planner (CFP) or fiduciary advisor can help you:
Preparing for a long, financially secure life is not about fear - it’s about confidence. The earlier you start making thoughtful, informed decisions, the better prepared you’ll be to enjoy your later years without financial stress.
If you’re wondering whether your savings will last, take that as your cue to act now. Evaluate your spending, diversify your income, protect against health expenses, and build a flexible withdrawal strategy that evolves with you. You’ve worked hard for your money, make sure it works just as hard for you.
