How long will my retirement savings last?

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How long will my retirement savings last

You might be wondering if you’ve stashed sufficient funds into your retirement savings account. Running out of money is a common fear in retirement.

Average retirement age

The timing of your retirement and your life expectancy both play considerable roles in your retirement planning process. Retiring too early and living decades past your retirement age might threaten your retirement savings.

According to one survey1, the average American plans to retire at the age of 62, while the average life expectancy in the U.S. is roughly 77 years1. Americans with significantly longer life spans will have to stretch their retirement savings across multiple decades of spending and inflation.

What is your retirement budget?

Your budget is one thing that will dictate how long your retirement savings will last. Don’t spend more than you have. Figure out how to stretch your savings by reviewing personal expenses and assessing how you spend your money across key categories. 

It’s better to determine your retirement budget before you retire. Consider these factors when mapping out your retirement savings plan and distribution strategy.

Needs

Start your retirement budget planning with the essentials: shelter, food, bills, health insurance, and other necessities. Track your monthly expenses in these areas if you do not already do so. Some families can reduce how much they spend on their needs, but it’s important to look for savings that also allow you to maintain your lifestyle.

Lifestyle

Some retirees get carried away with traveling and checking off bucket list items in quick succession. 

Your budget should include estimates for average monthly expenditures on vacations, cars, homes, and other lifestyle expenses. These areas present significant opportunities to scale back and stretch your retirement budget. 

Investments 

A good plan is to begin investing your money long before your retirement. Investing for retirement is a common path to early financial independence. When the awaited day arrives, and with a successful plan, you can lean on your investments to see you through retirement. 

Some people invest in assets that produce cash flow, like dividend stocks and rental properties. The retirement plans they put in place will help them decide how much to reinvest and how much to put toward their living expenses. 

Others invest heavily in retirement accounts. Ideally, you will be able to leave that money invested for decades, allowing plenty of time for the savings to compound and grow.

You also might decide to allocate part of your portfolio toward an inheritance for children or others as part of your distribution strategy. An advisor can help you decide how to make that happen. 

Calculating retirement income

Putting together a budget for today’s needs will help with retirement. Your current budget reflects your current income, and while retirement provides numerous perks, the main downside is losing your employment income streams. Aspiring retirees must plan around a potential income decline to stretch their retirement savings.

Your spending habits

If you look at your spending habits now and make adjustments, any money you save can go toward a retirement account. That will give your investments additional time to grow, which means there’s a greater possibility that you will not run out of money in your later years. 

It’s a good idea to review and address your spending habits long before you retire. A RoarMoneySM account will let you track your spending across multiple categories. This information allows you to make more prudent financial decisions in your lives. 

Addressing your spending habits now will help you save additional money for retirement. Creating a RoarMoney account can help track your spending habits and get you on the right path toward a smooth retirement.

Are you saving enough?

While setting a retirement budget will give you a realistic viewpoint of your monthly expenses, you might also find you need more money to live as you want to. 

Retirement is one of those life-altering financial decisions, and it’s best to over-prepare. Save more than you think is necessary so that you can more readily weather the unexpected.

How to stretch your retirement savings

Many retirees live at least a decade beyond their retirement day. Stretching retirement savings across that window aids with a smooth retirement. Addressing your spending habits now will help you build your financial cushion. When you retire, taking several specific measures can alleviate the stress of living off your retirement savings.

Delay your Social Security benefits

Some retirees will rush to receive their Social Security benefits when they become eligible at 62 years old. While Social Security will provide income starting at that age, the program rewards retirees who are patient. The longer you wait to claim Social Security benefits, the more you will receive each month (until age 70).

As an alternative, some 62-year-old retirees claim Social Security when eligible and invest the proceeds. Each person is different, and you can devise a plan that is just right for you and your family.

Keep working

Each extra year of work reduces the stress on your retirement savings while providing more income to cover expenses. Some Americans with proper health and desire continue working into their 70s and 80s. If you work longer, you decrease the likelihood of outliving your retirement savings.

Part-time jobs count, too. This lifestyle change will give you free time while still providing an income stream. The extra money might help you delay Social Security benefits and having to tap into your retirement savings. 

Move to a cheaper location

Where you live will influence your monthly expenses. Moving to a cheaper area will automatically lower your costs and stretch your retirement savings. Try to find an affordable location that provides popular amenities like more expensive counterparts but without the high cost of living.

Identify the cost of living in your area and start looking for more affordable places. Depending on where you live, a cheaper location may be only an hour away from your current location or in a community several states away.

Downsize 

Many retirees embrace minimalism to fund their lifestyles. They sell valuables on eBay, make money from cars they no longer need, and move into smaller homes. When families downsize their houses in preparation for retirement, they probably also enjoy lower mortgage, utility, and tax payments. Living accommodations account for the highest percentage of most budgets. People who downsize their houses for retirement can save hundreds of dollars each month. Even families saddled with debt can downsize their way to a debt-free lifestyle. 

Prioritize health 

Your health should always be paramount, but it gains extra importance for retirees. Medical procedures cost considerable money and can quickly bite into retirement savings. Prioritizing your health will reduce your co-pays, out-of-pocket medical expenses, and medication payments. Eating healthy and following an exercise regimen will preserve your health and finances.

Invest your way to retirement 

Unfortunately, many people do not think of retirement until a few years before they plan to retire. Investing for retirement now will help solidify your financial future, so your retirement savings stretch throughout your lifetime. 

A MoneyLion Investment Account can help you reach your retirement goals faster with automatic investing, a personalized portfolio based on risk tolerance, thematic investing, and other perks. Build your way to a robust retirement with a MoneyLion investment account today.

FAQ

How much should a retired person have in savings?

A retiree should assess their monthly budget when determining how much to save. Opt to over-prepare yourself for retirement rather than under-prepare.

How much money do you need to retire at 60?

You need sufficient funds in your retirement account to cover monthly expenses for years to come. Downsizing your lifestyle will help you stretch your savings.

What is a reasonable amount of money to retire with?

Your monthly expenses determine what a reasonable amount of money looks like. Some people can retire with under $1 million, while other people can’t afford to retire without $3 million saved up.

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