Don’t Outlive Your Money: 4 Steps to Ensure Your Savings Last

One of the biggest fears people have about retirement is running out of money. In fact, studies have shown that nearly two-thirds of Americans fear outliving their savings more than they fear death itself. It’s a serious concern – but it’s one you can address with proactive planning. Here are 4 key steps to help ensure your savings last as long as you do (and hopefully longer):

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One of the biggest fears people have about retirement is running out of money. In fact, studies have shown that nearly two-thirds of Americans fear outliving their savings more than they fear death itself. It’s a serious concern – but it’s one you can address with proactive planning. Here are 4 key steps to help ensure your savings last as long as you do (and hopefully longer):

Step 1: Create a Realistic Retirement Budget and Plan for Longevity

Start by getting a clear picture of your expected expenses in retirement. Make a detailed budget that includes essentials (housing, food, healthcare, insurance) and discretionary fun (travel, hobbies). Be realistic – it’s better to overestimate expenses than underestimate. Once you have an annual figure, factor in a long retirement. It’s not uncommon to live 20-30 years in retirement, maybe more.

Plan as if you’ll live to 95 or 100. This isn’t pessimistic; it’s prudent. Planning for a long life means you’ll be prepared if it happens (and if not, your heirs or charities benefit). Don’t forget to account for inflation in your budget – what costs $50,000 a year now might cost $80,000 in 20 years. Build in an inflation factor (e.g., 2-3% per year for general expenses, maybe more for healthcare). With a realistic, inflation-adjusted budget and a long-term view, you’ll know how much income you need your savings to produce.

Step 2: Develop a Sustainable Withdrawal Strategy

One classic guideline is the “4% rule,” which suggests withdrawing about 4% of your portfolio in the first year of retirement and then adjusting that amount for inflation each year. This was historically considered reasonably safe for a 30-year retirement. However, it’s a rule of thumb, not a guarantee – and in today’s environment, some advisors suggest a slightly lower starting percentage (like 3.5%) to be more conservative. The key is to find a withdrawal rate that matches your portfolio size, asset allocation, and comfort level with risk.

If markets have a bad year, you might adjust your withdrawals (e.g., skip an inflation raise or even cut back a bit) to stay on track. Some people use a dynamic withdrawal strategy: withdraw a fixed percentage of the remaining portfolio each year so that you never completely run out (though income will fluctuate). The bottom line: have a plan for how much you’ll draw from savings annually, and be willing to adapt it with market conditions. Avoid the mistake of overspending early in retirement – it can dramatically increase the chance of depleting your nest egg.

Step 3: Secure Guaranteed Lifetime Income for Basic Needs

One way to not outlive your money is to make sure you won’t outlive some of your money. Social Security is the most common lifetime income source – and it’s indexed for inflation. If you’re married, plan smartly around your Social Security claiming strategies (sometimes the higher earner delaying benefits to 70 can substantially increase the survivor benefit later on, which can act as longevity insurance).

Beyond Social Security, consider if a pension or annuity might make sense to cover your essential expenses. Pensions are less common nowadays, but if you have one, that steady check is gold. If not, you might look into an annuity that provides guaranteed income for life (like an immediate annuity or a deferred income annuity). The idea is to set up enough guaranteed income – from Social Security + pension + annuities – to at least cover your basic living expenses.

When your necessities are funded for life, you reduce the risk of having to withdraw too much from investments during downturns. For example, if your basic expenses are $40k a year and Social Security + a lifetime annuity give you $40k, then your investment portfolio can be tapped mainly for discretionary spending, and you could even tighten the belt in a pinch without worrying about groceries or electricity bills. Guaranteed income acts as a safety floor.

Step 4: Plan for the Unexpected (Build Buffers and Protectors)

Life in retirement will still throw curveballs – could be a major health expense, an expensive home repair, or helping a family member in need. Longevity itself is a wildcard – living 5 years longer than expected means 5 more years of spending.

To ensure you don’t outlive your money, incorporate safety nets and buffers:

Emergency Fund: Keep a healthy cash reserve for unplanned expenses, so you’re not forced to dip into investments at a bad time. Typically 6-12 months of expenses in cash or a liquid account is wise, even in retirement.

Insurance: This includes health insurance (Medicare and possibly a supplemental plan), long-term care coverage (or a strategy for long-term care costs), and life insurance if you have dependents or a spouse relying on your income (you might need life insurance to replace lost pension benefits for a surviving spouse). Insurance transfers those high-cost, unpredictable risks to an insurer.

Debt Management: Entering retirement with large debts, especially high-interest ones, can strain your savings. Try to pay down or eliminate high-interest debt before retiring. If you can, going into retirement mortgage-free reduces your monthly outflow, which helps your money last.

Flexibility: Be prepared to adjust discretionary spending if needed. Perhaps you postpone a big vacation if the market had a rough year and your portfolio is down. Having flexibility and willingness to moderate spending can add years to your portfolio’s lifespan.

By expecting the best but preparing for the worst, you give yourself a cushion. It’s like having a shock absorber on your retirement income plan.

Final Thoughts

Ensuring your savings last is all about balance – balancing spending with preserving, balancing safety with growth, and balancing enjoying today with planning for tomorrow. With these five steps in place, you’ll be far better positioned to not outlive your money.

At Legasure, we help clients craft sustainable retirement income plans just like this. If you want an expert partner to map out your retirement paycheck and longevity strategy, schedule a consultation with us. We’ll work through your budget, optimal withdrawal rates, investment mix, and contingency plans so you can retire with confidence that your money will go the distance. After all, retirement is supposed to be enjoyed – let’s make sure worrying about money is off your plate so you can focus on living your golden years to the fullest. Schedule a consultation with our team here.