How long will my retirement savings last?

Key factors that may affect retirement savings longevity

Several factors play a part in determining how long your retirement savings will last. Becoming familiar with the factors and knowing how to plan around them can help you create a retirement income strategy that ensures your savings last throughout your retirement.

Projected monthly expenses 

Having a good idea of your average monthly expenses can help you determine the amount you'll need to withdraw from your savings each month.

Our Retirement Expenses Worksheet is a great tool for this. Just enter your estimated expenses for each category then calculate the total. You can print out the worksheet to keep with your records and update it if anything changes in the future. 

Potential rates of return on investments

Looking at historical average returns on investments can give you an idea of what your future earnings might look like. Typically, riskier investments have higher potential returns, but they also have higher potential losses. While reviewing your portfolio's performance, you might want to revisit your asset mix to see if it needs to be adjusted, since you'll likely have a lower risk tolerance as you approach retirement.

But keep performance in perspective, and remember that while you can use historical returns as a guide in planning, past performance doesn't guarantee future results. 

Inflation and its impact

Inflation can lead to increased prices and erode purchasing power, so for retirees living on a fixed income, it means their money won't go as far as it used to. This can make planning for long-term retirement needs challenging.

There are strategies you can use to help mitigate the impact of inflation on your portfolio. For example, you can maintain a diversified portfolio by spreading your assets across different investments to reduce your overall risk, and invest in funds that have historically kept pace with inflation, like stocks and Treasury Inflation-Protected Securities (TIPS). If you're able to, you may also consider delaying your Social Security benefits, since they're indexed to inflation and could be higher in the future. 

Potential unexpected costs

Emergencies—from a medical bill to a new appliance—are a fact of life. It's important to keep a cushion in your savings for any unexpected costs that arise during retirement. Having enough extra money for emergencies is important because it can prevent financial setbacks like taking on additional debt to make a purchase, and it can reduce your stress during difficult times.

Being prepared gives you the confidence to tackle unanticipated events without adding money worries to your list. 

Strategies to extend the life of your retirement savings

There are different ways you can help extend the life of your retirement savings. You may find that you need to create a new budget based on your retirement income or reduce your expenses so you can lower your withdrawal rate. You also might consider diversifying your income sources to create a cushion.

Adjust your withdrawal rate

It helps to have a retirement withdrawal strategy in place. Your withdrawal strategy should allow enough money to support your desired lifestyle and ensure that there's enough left for the future.

There are several different retirement withdrawal strategies you can review to see which best meets your needs. And be sure to keep in mind the IRA withdrawal rules so you're aware of any tax implications. 

Budget and reduce your expenses

Creating a budget and tracking your income and expenses can help you understand where your money is going and identify any areas where you can cut back. When you're reviewing your budget, you may come across some nonessential expenses you can eliminate, like unused subscription services.

Once you create a budget and reduce your expenses to fit within it, you'll foster a habit of financial discipline, making it easier for you to continue to make smart decisions with your money.

Diversify your income sources

To supplement your investment income in retirement, you may want to add other income sources. You could consider a part-time job or freelance work in something you enjoy, like writing or selling handmade crafts. If you're an expert in a particular field, you can share your knowledge with others by teaching classes or tutoring. Working part-time during retirement is a great way to keep your skills fresh or hone new ones while earning additional money. 

Tips for managing retirement savings

You can take action along your retirement journey to manage your investments and help make your retirement savings last.

Educate yourself by staying on top of market trends and retirement insights to increase your financial knowledge and feel more confident along the way. You'll also want to periodically review your financial plan and make any adjustments for major life changes like moving or welcoming a new family member.

No matter where you are in the retirement planning process, you might consider seeking professional advice. Advice may be a good fit if you need help managing your investments, are looking for guidance around withdrawals, or have other questions throughout the planning process.