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Retirement Planning

How long will my retirement savings last?

Maximize your retirement savings by understanding factors that impact their longevity, like living expenses, withdrawal rate and healthcare costs.

You’re finally ready to retire. Congratulations! You’ve done all the work and planning, now it’s nearly time to make the big move. You may be asking yourself, “How long will my retirement savings last?” It’s an important thing to consider. The length of your retirement savings will depend on a few different things, like your spending habits, investment returns and life expectancy. It's important to create a plan to make your retirement savings last. This includes considering factors like your estimated expenses and the expected return on your investments. It also involves regularly reviewing and adjusting your plan to align with your changing financial needs. Having a clear approach can help you feel more comfortable throughout your retirement years. 

Factors that impact how long your retirement savings can last

There are several factors that can impact the longevity of your retirement savings and limit how long they'll last. Here are some of the most important ones to consider:

  • Savings: The amount you've saved for retirement will play a significant role in determining how long your savings will last. The more you've saved, the longer your savings will typically last.
  • Living expenses: Your monthly expenses in retirement will have a big impact on how long your savings will last. Lower expenses can help extend the life of your savings, while higher expenses can shorten it.
  • Job loss: Unexpected job loss or early retirement can significantly impact your retirement savings and reduce the amount you have available to spend in retirement.
  • Medical expenses: Healthcare costs are a significant expense for many retirees and can add up quickly. Having a plan in place to cover these costs is important to ensure your savings last as long as possible.
  • Social Security: Your Social Security benefits will play a role in determining how long your retirement savings will last. The more you receive from Social Security, the less you'll need to rely on your savings.
  • Withdrawal rate: The rate at which you withdraw money from your retirement savings can also impact how long your savings last. Withdrawing money too quickly can deplete your savings faster while withdrawing more slowly can help make your savings last longer.

Keeping close tabs on these factors can help ensure your retirement savings last as long as you need them to. Additionally, you may want to consider how retirement planning tools like annuities can be leveraged to supplement Social Security or to receive lifetime income.

How many years should retirement savings last?

Those who are considering retirement often wonder, “How long will my money last in retirement?” The length of time retirement savings should last depends on various factors specific to your situation. Everyone's retirement situation is different, so there’s no one-size-fits-all answer.

To estimate how long your savings should last, you can start by estimating your retirement expenses, including the cost of living, healthcare and any other expenses you may have. You should also factor in your expected retirement age, Social Security benefits, and any other sources of income. If you plan to retire early, your savings will need to last longer. If you plan to retire later in life, you may have a shorter time for your savings to last. But don’t overlook the possibility that you may have to retire earlier than expected.

When calculating how many years your retirement saving should last, you may also want to consider how long you will live in retirement. According to The Center for Disease Control, the average life expectancy for women is 79 while men live to 73, meaning women’s savings need to last longer. If you are a woman planning for retirement, consider how retirement planning is different for women.

To make sure your retirement savings last as long as you need them to, it's important to review your plan and make adjustments as necessary regularly. This may include adjusting your spending habits, increasing your savings rate or reevaluating your investment strategy. Taking a proactive approach to managing your retirement savings can help reduce the stress that can occur when planning your finances.

How long can my retirement money last?

Longevity in retirement depends heavily on expenses. Understanding your spending in retirement is crucial to making your savings last as long as possible. Unfortunately, there’s no official calculator to determine how long your retirement money will last, but according to the Bureau of Labor Statistics, the average retiree in the United States spends around $45,000 per year or approximately $3,750 per month.

Consider consulting with a financial professional to create a retirement plan that’s tailored to your specific needs and goals.

How to make your retirement savings last?

Not everyone is able to save a substantial amount for retirement, but there are still steps you can take to help stretch your retirement savings for as long as possible. You can make the most of your savings and plan for a secure financial future by keeping a few things in mind.

Consider things like your retirement length, spending habits and living expenses when determining how much you need to save and how to allocate your savings. It's also important to keep your expenses in check, minimize debt and regularly check in with your retirement plan to ensure it remains aligned with your financial goals.

Remember that retirement planning is a marathon, not a sprint, and even small steps taken consistently over time can make a significant impact. Don't get discouraged if you can't save as much as you'd like. Instead, consider focusing on other ways to supplement your retirement income and improve your financial situation. Options like the 4% rule, income floor strategies, retirement annuities and good old-fashioned budgeting can go a long way in effectively managing your finances.

The 4% savings rule

The 4% savings rule is a commonly used guideline for determining how much money you can “safely” withdraw from your retirement savings each year. The basic idea is that you can withdraw 4% of your total savings balance in the first year of retirement and adjust the amount each year for inflation.

For example, if you have $500,000 saved for retirement, you could withdraw $20,000 in the first year. The following year, you would adjust the amount you withdraw based on the inflation rate. If inflation is 2%, you would withdraw $20,400 in the second year.

Keep in mind that the 4% savings rule is just a guideline and may not be appropriate for everyone. Other factors like your retirement length expectancy, inflation rate and investment performance should be taken into consideration when determining your retirement withdrawal strategy.

Income floor strategy

The income floor strategy is a retirement planning approach that aims to provide a minimum guaranteed level of income to help meet your essential expenses in retirement. The idea behind the income floor strategy is to create a foundation of reliable income that can help ensure your retirement savings last as long as you need them to.

By having a guaranteed income stream from sources like Social Security, pensions and annuities, you can reduce the reliance on your retirement savings for basic expenses and increase the longevity of your savings. The income floor strategy can provide the assurance of knowing that you have a guaranteed source of income to cover your essential expenses, even if market conditions or investment performance are unfavorable.

When considering the income floor strategy, it's important to carefully evaluate all potential sources of guaranteed income and determine the amount of income you need to meet your basic expenses. You should also consider factors like inflation, taxes and the impact of future market conditions.

Retirement annuities

Annuities can be a valuable tool to help make your retirement savings last. An annuity is a contract between you and an insurance company where you make a lump-sum payment or series of payments in exchange for a guaranteed stream of income for a specified period of time or for life. By choosing an annuity option that aligns with your financial goals, you can create a predictable and reliable source of income for the duration of your retirement.

This can help you manage your retirement savings more effectively and provide comfort in knowing you'll have a steady income stream. Before purchasing an annuity, it's important to carefully consider the different types of annuities and the terms of each, including the length of the income stream, interest rate, and fees.

Create a budget

Creating a budget for retirement can be a crucial step in making your savings last as long as possible. By having a clear understanding of your expected expenses and income, you can better plan for the future and make informed decisions about your savings and spending.

When creating a budget for retirement, consider all of your expected expenses, including housing, healthcare, transportation, and leisure activities. Make sure to also factor in potential increases in expenses due to inflation. Then, estimate your expected sources of income, like Social Security, pensions, and investment income. By comparing your expenses to your income, you can get a clear picture of your retirement financial situation and make any necessary adjustments to help ensure your savings last as long as you need them to.

Having a budget for retirement can also help you make informed decisions about how much to save and how to allocate your savings. It can give you a roadmap to follow and help keep you on track toward a secure and comfortable retirement.

Annuities are intended as vehicles for long-term retirement planning, which is why withdrawals reduce an annuity’s remaining death benefit, contract value, cash surrender value and future earnings. Annuities also may be subject to income tax and, if taken prior to age 59 ½, an additional 10% IRS tax penalty may apply. Because Protective and its representatives do not offer legal or tax advice, it is important that you talk with your own legal and tax advisor about your specific tax situation.



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