How Long Will Your Retirement Savings Last?
You’ve worked hard to save for your retirement, and perhaps you have accumulated a sizeable sum of money. Now it’s time to start making monthly withdrawals to provide a steady stream of income during your retirement. So here’s the big question: Will your funds last you long enough? As people live longer and possibly enjoy two or three decades of retirement, many wonder whether they have saved enough. Do you know your current life expectancy? Of course, no one can predict how long you are going to live, but the Social Security Administration has developed a life expectancy calculator that gives you the average number of additional years you may expect to live, based on your gender and date of birth. This information may help you with your retirement planning and decision-making about how much monthly retirement income you need and how long your savings will last. Once you decide on a monthly income amount, plug your figures into our calculator to view a graph summarizing your earnings, withdrawals and retirement account balances over time. Knowing the longevity of your savings can help you adjust your retirement plan in advance before you actually exhaust your funds.Five Ways to Not Outlive Your Retirement Savings
Here are several tips to help make sure you don’t outlive your retirement savings:
1. Delay Your Retirement
In order to extend the longevity of your retirement savings, you may want to continue working full-time a few more years to earn additional income and put aside extra savings. If you are healthy and enjoy your occupation, working longer could be a win-win scenario.
2. Delay Getting Social Security Benefits as Long as Possible
To receive Social Security benefits, you can retire any time between age 62 and 70. However, if you wait to take benefits past your full retirement age, the monthly amount you receive is increased by a certain percentage, depending on your date of birth and the number of months you delay. Keep in mind the benefit increase no longer applies when you reach age 70, so waiting longer than that to take Social Security does not offer you any further financial advantage. Learn more about delayed retirement credits and how you could increase your monthly Social Security benefit to boost this fixed source of income during your retirement.
3. Reduce Your Retirement Expenses
Even with diligent saving habits, you many need to be flexible and adjust your retirement expenses once you stop working. If it appears that you need to stretch your savings, you may want to adjust your retirement lifestyle by eating out less, scaling down your travel plans or downsizing into a less expensive house or condo. Reducing your monthly expenses by even a few hundred dollars can add up over time and help extend the life of your retirement savings.
4. Supplement Your Retirement Income
Another way to help ensure you don’t outlive your retirement savings is to consider a part- or full-time job after you retire. Working 10-20 hours per week in a new part-time job or continuing to work in your profession as a consultant could help make up the difference if you know you are going to need to supplement your retirement savings, Social Security, pension and/or investments with extra funds.
5. Reduce Your Retirement Withdrawals
Once you have a clearer understanding of how long your retirement savings will last, you can evaluate your budget and make any necessary adjustments. By lowering your monthly retirement income amount, you can probably reduce your retirement account withdrawals to help make your funds last longer. You may want to consider these three retirement withdrawal strategies to help you manage your retirement funds.
There’s one other important thing to do to help protect your retirement savings. Take time periodically — at least annually, if not more frequently — to review your retirement accounts and strategies with your financial professional. Consulting with a financial professional you trust can help preserve and grow your savings over time and make sure you are comfortable with your current level of investment risk.
Using This Retirement Withdrawal Calculator
If you’re close to retirement, our Retirement Withdrawal Calculator allows you to review your projected account withdrawals over time so you can make any necessary adjustments to your overall retirement plan if it appears your funds will not last the duration you anticipate. Using the financial figures you provide, our calculator creates a retirement account detail that graphically summarizes your earnings, withdrawals and balances until your retirement funds are depleted.
About Your Inputs
Our Retirement Withdrawal Calculator collects your personal financial information for three different areas: your required retirement income, fixed income and overall savings with assumptions.
Income Objectives
This section asks you about your retirement income needs:
- Your monthly retirement income (before-tax) – This is the amount of money in pre-tax dollars you anticipate needing to cover all your expenses each month during your retirement. This is typically a certain percentage of your full working income because you generally have fewer expenses in retirement.
- Annual percentage increase for your income – This is the percentage of additional income you think you will need each year based on inflation, an economic measure of increasing prices for goods and services. For the 10 years between 2012 and 2021, the average inflation rate in the U.S. was 1.88%. If you have other expenses that increase annually, like rent or homeowners association fees, you will want to account for these as well.
Fixed Income Receipts
This section asks you about your sources of fixed income:
- Monthly Social Security income and annual percentage increase – Eligibility for Social Security begins at age 62, and delayed retirement credits continue increasing until age 70. The age at which you retire (year and month) will determine the Social Security income benefit you receive each month. This benefit will remain fixed throughout your retirement, except for your cost-of-living adjustment (COLA), the percentage increase in your benefit each year set by Social Security. The COLA for 2022, effective with benefits payable in December, is 8.7%.
- Monthly pension income and annual percentage increase – If your employer offers a pension plan as part of your benefits package, include the monthly fixed income amount you receive, along with any yearly adjustment for inflation or cost of living.
- Any other monthly income and annual percentage increase – You can include any additional sources of monthly fixed income — such as rental property income, alimony payments or money received from a trust — and a total annual percentage increase, if applicable.
Savings & Assumptions
This section asks you about your total retirement savings and what assumptions you want to make for your calculations:
- Current retirement savings account balance – Include here the total amount of money you have accumulated up until now from all your different sources of retirement savings. These streams of retirement income may include funds from 401(k), 403(b) and 457 plans as well as traditional and Roth IRAs, annuities, and other investments (stocks/bonds) and savings.
- Annual before-tax rate of return – This is the yearly percentage of earnings you project to make on your retirement investments/savings, before taxes. Your investment return and principal value of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.
About Your Results
First, our Retirement Withdrawal Calculator will tell you approximately how many years your retirement funds may be able to supplement your streams of fixed income, along with a total of your systematic withdrawals. Next, you will be provided with a bar graph detailing your earnings, withdrawals and ongoing account balances.
More Retirement Calculators
- Retirement Savings Calculator With Pension & Social Security
- 401(k) Growth Calculator
- Retirement Cost of Living Calculator
Explore our variety of Financial Calculators to help assess your needs and achieve your financial goals.
