How Long Will My Savings Last in Retirement?

Will your savings, social security benefits, and money in your retirement accounts be sufficient to last the duration of your retirement life?

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Will your savings, social security benefits, and money in your retirement accounts be sufficient to last the duration of your retirement life?

There is a universal benchmark of 4% withdrawal on every 50% of retirees’ money invested in either stocks or bonds, based on inflation and taxation. Retirees can withdraw it when each year ends, for about 30 years. However, it’s also based on the rate of return over that period.

One fear common of most retired people is not knowing if the money they save will be enough for them till they die. However, with proper planning, risk management, and investment, a certain threshold of savings will be enough for them until the average death age.

Table of Contents

Does How Long I Live Affect Savings?

The question of retirement and how long your savings will last you becomes really important when you are trying to plan financially for retirement. If you knew how long you were going to live this would be very easy to estimate.

But no one really knows how long they will live, and this is the problem that a lot of retirees face. It is called the longevity problem. Everyone wants to live as long as they can but if only they have an infinite amount of retirement savings and most do not have new money coming in all the time.

Another thing that you have to consider is what you are doing with that savings, is it just sitting in the bank and you have divided it up over a certain number of years, or is invested in the market.

If invested in the market, you have to even be more careful because the five years before you retire and the five years after you retire is known as the retirement red zone and if you fall into that red zone, it means that in that 10-year span, negative impacts to your portfolio could drastically reduce how long your retirement savings will last.

One of the solutions that you could look at is how many years do you need to plan for. An issue that is common in retirement planning today is that people plan for an average age life expectancy of 85 years old because that is when the average person passes away.

However, some people die while some people live much longer and if you are on the side that lives much longer than 85 years old, how do you have the money to continue surviving?

This is the case where an annuity could play a vital part in having an income that you are not outliving. It doesn't matter what age you are at; you need to start making those decisions because the last thing you want is to run out of money when you retire.

How will Insurance and Spending Help Your Savings During Retirement?

You also need to be looking at how you are protecting your assets, do you have long-term care insurance in place? Because a lot of retirees money can be spent and soaked up by health care costs and nursing facilities.

All these sorts of costs add up with the ones that you have planned for. One of the things that happen is when people retire, the cost that they are spending does not just go away and will probably be living the same lifestyle or a more expansive one.

Retirement is just like every day is a Saturday, there is enough time to travel to go see the grandchildren, go see a football match, and stay out playing golf, and all this means that you are spending more money.

Make sure you have enough money to protect yourself from the volatility of the market and that you can sustain a 30-plus year retirement because that is really what you need to be planning for if you are ready to take the next step.

How can Investments Help You During Retirement?

How long your investments will last in retirement is a function of where your money is invested. If it is in a mattress, not very long. If it is in a bank, not much better. But if it is in the right stock in the market, you may be looking at a long term investment.

The most important thing when relying on investment for retirement is to create predictable rates of return and to know exactly how long it will last.

It is pretty pathetic how many people have a lot of their savings in very low yielding accounts, maybe with banks or credit unions, earning 1 or 2 percent. The fact is that it is not going to last very long there unless you have so much money that 1% interest will cover your cost of living needs, even if inflation doubles the cost of living every 7 to 10 years which is most likely the case.

How much your retirement account gives as income and for how long is based on return rate and also strategies you use in battling inflation and making it work in your favor.

Most retirees are way too heavy in the investment bucket where they use money, in yet to be taxed IRAs and 401Ks, in the market. This is very wrong and you should not have this money in the market due to that volatility.

What are the Threatening Factors to Savings During Retirement?

The 2 dangers that erode away most retirees’ money or cause them to outlive their money are:


The negative impact of taxes is so money-draining, yet most people fail to realize this. If you pull out 90,000 a year, you will only be netting 60,000 because a third of it goes out the window in taxes.


Another danger is inflation. This has been averaging almost 10 percent but a lot of people are ignorant of this fact because the government changes the way they report inflation. Health care costs are through the roof. So, the actual cost of living is different than the annual inflation rate that the government throws out there in small figures like 3 to 5%.

In reality, some costs are going up 10, 15, and 20 percent. So, you need to earn a rate of return that is equal to or greater than the inflation rate. You can do this by linking your returns to things that inflate. This is known as indexing. Hence, if inflation goes to 5%, you would have earned at least 10 or more. If inflation is 10% you would earn 15% etc.

How You Can Plan Your Income To Help You With Retirement?

As you look at the possibilities for what we call decumulation, which is really the second phase of retirement planning after the accumulation of assets, you need to think about how you are going to spend down your assets. What makes sense to do is to establish a blueprint, which will help plan for the amount of retirement income that's necessary.

Reaching retirement means switching from accumulating assets to drawing down assets. And while a lot of folks plan as if retirement is going to happen on a set day, keep in mind that it is actually a process. Some people will ease their way into retirement or possibly use it to start a second career, for instance.

Now financially, it can be different because you have to replace a paycheck. And it means switching over from that growth-oriented mindset, where you are strictly investing and trying to accumulate assets, to drawing down those assets, as well as investing within retirement itself, which is going to be an income-oriented mindset.

In order to maintain a lifestyle and ensure the care that you are after in retirement, you must have a priority, preserve capital, but make certain that it lasts. This means your investments need to live as long as you are projected to live.

So take into consideration the fact that if you are hitting age 65, the chances are about 50% odds of you making it to the age of 85.

An income statement helps retirees list the income streams alongside the expenses to determine if the income is enough to handle expenses. Corporations use income statements all the time for planning purposes. They need to determine if they have a positive or negative net income and then what to be done from there. Retirees can borrow from this leaf the same as individuals and look at their income sources alongside the expenses. This involves three steps. First, assess the income sources. Secondly, identify expenses. Thirdly, calculate if there are any gaps.

What needs to do to be done is avoiding analysis paralysis. This does not need to be perfect right from the start. Building the correct plan usually takes place over time. And it involves some fine-tuning too.

If you have a partner, don't go about this alone. Make sure that they are involved. Since retirement affects the entire household, you need to plan accordingly by including your partners when building this income statement because they will manage income and expenses without you someday.

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