How long will my retirement savings last? (2024)

Once you’ve retired you’ll be living off any savings you have, Social Security benefits, and, if need be, further assistance from friends, family, civic groups, and maybe further government assistance. You’ll need all this support because you’re likely to keep living for a long time after you’ve stopped working.

Will you outlive your retirement savings?

People are living longer than ever. The Social Security Administration reports that the average life expectancy for a man or woman turning 65 today will live to be 84.3 and 86.6, respectively. Beyond that, one in four 65-year-olds will live past 90 and one in 10 will live past 95.

Sixty percent of Baby Boomers said they feared outliving their savings more than dying, according to a recent study by Allianz. This finding was more or less confirmed by Transamerica who found that 43% of survey participants felt the same way.

Making your retirement savings last longer

Given the number of people worried about their retirement and the number of professionals who make money off your retirement, it makes sense that there are several strategies that you can use to stretch out your savings without squishing your quality of life.

Retirement savings and the 4% rule

In 1994, William Bengen first put the 4% rule into words. Based on his research, Bengen discovered that if you invested at a minimum 50% of your money into stocks and the rest into bonds that you’d likely be able to withdraw an inflation-adjusted 4% of your savings every year for 30 years. That’s 4% of your savings every year that’s adjusted for inflation yearly. Bengen tested his theory under various historical conditions, including the Great Depression, and 4% held up.

Use dynamic withdrawals

The 4% Rule is one size fits all but life is not. For this reason, there’s a variety of alternative withdrawal options to make use of depending on how well your investments are doing during a given year. You may want to consult a financial professional to put some of these to use because they can get complicated. These strategies are particularly useful if you want your savings to last more than 30 years which, again, is unlikely to happen.

The income floor strategy

This is a strategy for not selling off your stocks when the market is down. It’s quite simple.
First, calculate how much money you need for basic essentials like food and shelter. Make sure these needs are met using guaranteed income such as Social Security and an annuity. An annuity is anything that you pay at regular intervals, like a mortgage or a savings account. Then, when the market is low, just spend less money and ride it out. Remember, the market has a historical upward trend. So long as you don’t let fear win out your investment recover and grow.

Retire later in life

This is a very simple strategy: you take your retirement and you put it off. This way your Social Security benefit will increase, your savings will increase, and you’ll have more money in your savings. Another way to think about this strategy is that you will keep working into your so-called “retirement years.” A third perspective on this is that rather than not doing your job you will continue doing your job.

A lot of people actually imagine themselves working past retirement but fewer do, so don’t entirely bank on this strategy working for you. Take your health and your family’s health history into consideration. Also, think about how you actually want to spend your retirement. Maybe working until you’re incapable of working isn’t the most enjoyable way to live.

Downsize your home

If you own your own home then you may consider getting a smaller one when you’re older. There are many reasons to do this. Maintenance and mobility are two big considerations. There are many great reasons to rent, in fact. It may be more affordable, some apartment complexes come with amenities, and you may be able to live in a location you’d otherwise be unable to afford (like a big city).

Retirement income examples by age

Here are some sample scenarios to guide how you view retirement income later in life.

How long will $300,000 last in retirement?

If you have $300,000 and withdraw 4% per year, that number could last you roughly 25 years. That’s $12,000, which is not enough to live on its own unless you have additional income like Social Security and own your own place. Luckily, that $300,000 can go up if you invest it. If, for example, you invest in the stock market and get a return of 7% per year, then you can get $22,800 a year, which is $1,900 a month. That’ll last about 33 years at that rate.

How long will $500,000 last in retirement?

If you have $500,000 put away, that will last 25 years if you withdraw $20,000 per year. And that number will only grow if you invest it and get a 7% annual return. Now you’re getting $3,250 a month ($39,000 per year) for 30 years and two months.

How long will $1,000,000 last in retirement?

One million dollars will last for 30 years if you take out $33,333 per year. At an annual return of 7%, that number will allow you to take out $77,500 a year for 30 years and two months.

Use a retirement income calculator

With a retirement income calculator, you can keep playing around with different numbers to see how much you should save given Social Security benefits. You’ll be able to imagine a future where you live over 30 years even though, again, one in ten are not great odds. Living another 20 years, though? Very likely/ Of course, when planning for the future incorporate a pessimistic vision as well so that you’re well prepared.

Bottom line

With people living longer these days, the fear of outliving one’s savings has become increasingly widespread. Rather than be paralyzed by fear, however, you can use your awareness to make a robust plan for your future. You won’t be walking down an unbeaten path, so make sure to consult the wisdom of the masses so you can live a retirement that’s unique to you.