Will You Outlive Your Money in Retirement?

I’ve been retired officially for a couple of years now and I did a pretty good job of trying to save and prepare for my golden years. But truth be told, almost every month I wonder if I will have enough to last. Is it possible to outlive your money that you’ve stashed away in retirement plans? Actually, it’s the biggest fear of retired folks today and that’s according to experts. Over 44% of all persons and 41% of all retirees think they may and actually fear they might outlive their money!

Will You Outlive Your Money in Retirement?

Prepare yourself right now and avoid these pitfalls than can make your retirement a lot less than “golden” if you don’t get it right.

1. Your stock holdings are a mess

There are two huge problems that can sink you when it comes to something you may have been totally comfortable with most of your life.

First of all, you already know that the markets are risky (most of the time just by their nature), but as a retiree, it can be really dangerous. A lot of people get completely out of the market to avoid any risk and that can be a big mistake. The market over time has been making and will make money and it’s money you will need as you live 15, 20 or even 30 years into your retirement. The 60-40-20 rule is what I have heard it called and it goes like this:

While you’re at your peak earning years, you allocate your investments to include 60% of it into stocks, bonds and funds that you believe in. Then use the time frame of your 30’s and 40’s to make those numbers climb.

As you enter you 50’s, your risk tolerance shrinks somewhat as you are thinking about your retirement and can actually see that day coming. The advice here is to reduce the risk and cut your allocated investment to 40% of your retirement funds.

Finally, in retirement the one thing you don’t ever want to happen is to overinvest. As you enter retirement, keep just 20% of your money in the market. That reduces your risk and it also will allow you to continue to earn a bigger return than your CD’s and money markets will. Playing the investment game with target date based funds or tried-and-true market performers will help your results and avoid big losses. Get some advice before you take any real risks. It can provide you with that edge you need in your old age.

2. You might just live too long

Of course living to a ripe old age is a joy, at least in theory. If you do make it to say 85, 90 or older (and we are living longer than ever these days!) it can also wind up being a painful experience. For one, you may be ill or infirm and yet still alive. There’s not a lot you can do about it when you’re in you 80’s, but there are some things you can do to prepare right now. You should plan for a longer life than ever before as the stats from Transamerica Center for Retirement have shown: If you’re a male who is 65, you can plan on living until you are at least 84. Women can expect to live on average until 87.

The key is that you cut back on some of your expenditures when retired and many people won’t or don’t. In fact, according to Transamerica’s survey, over 40% of newly retired people spent more money in their first two years of retirement that they did in the last two years that they worked! Retirement probably means downsizing your home, perhaps relocation, and a change of spending habits. Stop spending or else.

3. You don’t have alternate sources of income

Social Security (here I go again) is not supposed to be your only source of retirement income! You will need other forms, for most that will be your 401k or IRA plans but it may also be a part time job or a side hustle, rental property income, pensions or other things. But be wary about some of that. Pensions are rare these days and getting a part time job in retirement isn’t a sure thing.

In fact, 61% of retirees have said they want to work part time while retired but only 6% actually are able to find and maintain a real part time job. There are reasons for that fact and you may not like them. One is your health or the health of a loved one that just won’t allow you to continue your work. Then there are the infamous corporate takeovers, layoffs, and mergers that eliminate jobs. You may wind up working at McDonalds the midnight to 6 am shift and that’s probably not what you really want. While you may work it out, or may not need to actually work at a job, it seems to be what people think will happen. Prepare for what you will do way in advance.

4. You didn’t prepare for unexpected emergencies

What happens if you get sick? Did you know as an adult day care patient you will need on average about $17,000 a year to pay for those services? That’s more than your Social Security benefits may be. It gets even scarier if you are forced to reside in a residential nursing home, to the tune on average of over $90,000 a year.

That’s a good reason while you are younger and still relatively healthy to look at long term healthcare insurance. They are becoming a really important part of your insurance needs in the 21st century and now’s the best time to research them.

5. You might make some foolish mistakes after you retire

Be careful, things like taking your Required Minimum Distribution from your retirement plans at age 70 ½ must be done or you risk huge financial penalties. This happens to a lot of people.  In fact, at age 70½ this is the first place you should withdraw funds for your retirement, right after Social Security benefits. The next thing you withdraw is your Roth retirement account, and then the traditional accounts last as they are taxable in many cases.

6. You didn’t plan your tax strategies

Did you forget to think about what you may have to pay in sales, income, real estate and other taxes when you became 62 and up? Let me tell you this, it can be from simple to deadly depending on where you choose to live. There are 10 so-called friendly tax states that cater to those of the senior population and even those over the age of 50. These states have no income tax, or sales taxes. They also have lower school taxes and little or no real estate taxes unlike where I live. In New Jersey, every child is bused to school and almost all have school meals provided at very high costs to the taxpayers.

The 10 friendly tax states are: Alaska, Delaware, Nevada, New Mexico, Arizona, Georgia, South Dakota, Mississippi, Kentucky, and Louisiana.

One factor to consider though is your family and friends and where they live. Although relocating is a good choice, don’t plan on isolating yourself from all of your loved ones. It will affect your quality of life as much as any other factor.

7. You’re bankrolling your kids

Don’t be so helpful with your adult kids that you hurt yourself by giving your money to them while you really need it. It’s alright to plan to help by passing money on to them at the appropriate time, however you can be caught in that trap fairly easily. You help them in emergencies, and you help them with generous gifts. You have been taking good care of them their whole lives and now you must take care of yourself. It’s very difficult sometimes, but if you don’t, you know what just might happen? You may be knocking on their door seeking a place to live and other necessities.

The first rule of any good plan for retirement is to actually sit down and write out what you have and what you want. The 4% rule of using your retirement savings was a good way to plan years ago, but that has changed with the longer lifespans we have today. No matter what you save, using 4% every year will cover 25 years for yourself. What if you live 30 or more? What if you live even longer and/or have health issues? Adjusting that 4% number every year and using alternative revenue streams is a better strategy not to outlive your money.

What do you think about when you think of your retirement? Are your plans on the right course? Are you among the millions who are worried about the golden years?


  1. I’m glad you pointed out we shouldn’t go blindly by the 4% rule, Gary. I try to stay on top of the subject via Michael Kitces and Wade Pfau – Kitces for practical knowledge and Pfau for research. Pfau writes about sequence of risk, which cautions about withdrawing too much from your nest egg in the first few years of retirement. Still, many principles were not developed with the 20, 30, or even 40-something in mind. If one possibly has 60 to 70 years left to live upon retiring, he or she had better have a plan for passive income, side hustles, etc.

    1. When I read and hear about the many people who are looking to retire at 30, 35, and 40, I have also wondered how they’re going to support themselves over what could easily be another 50 years. But, I do read that these financially savvy people are definitely involved in alternate income streams and hopefully that effort means that retirement for them will not be the same idea that I grew up with. It is interesting to see how all of that will work for them. Thanks for your comments, Mrs. G.

  2. #7 is a tough one. I’ve seen this all too often. We want to be able to help our three children with college, but that assumes we have a steady income. (I have no reason to believe I won’t) But often if you are retired and on a fixed income, why would you give money away to your children who have far great earning potential. Might be time for some tough love.

    We continue to build wealth to protect ourselves during the golden years.

    1. Jack

      Agree with Brian. My parents have helped me a few times since I’ve left home. I don’t like it, and have asked them not to, since I’d rather they keep the money for themselves, just in case.

      Granted, there are tax reasons to gift money, but my parents aren’t at an age, or a net worth, where they need to concern themselves with that.

      Frankly, I’d rather they are lucky enough to use all their money exactly the way they want, and pass on owning and owing nothing. You can’t take it with you, and no point letting the government have back the half they didn’t take earlier…

      1. As a parent, there’s a great desire to want to continually nurture your children. I think it’s great that you have taken the approach that you’re going to do it with a minimal amount of help and to encourage your parents to enjoy their lives. As a good son, you contributed to that by not being a financial burden. Thanks for your comments, Jack.

    2. Brian, if you’re helping them through college, that’s an insurance policy (to a certain degree) that they will have a good start on building their own financial security. Nothing wrong with doing that. My fear is that so many people continue to help support their adult children through their 30’s and even their 40’s and that can take a dramatic toll on one’s financial well-being in retirement. I think we agree here.

  3. I had my youngest child at 43 so we will be paying high school or college tuition until we retire. She’s worth it though, and we do have assets. The calculator on my 401K website says we’ll be just fine even if I live to 90

  4. I’ve been saving SOMETHING toward retirement for almost 6 years now, but I haven’t done the math directly (gasp!) to see how long my money saved so far will last! I do worry about my parents though – they didn’t start saving anything for retirement until I was basically done with college. They’ll probably outlive their assets.

    1. K, in your case, don’t be frightened by a number that may not be what you think you need for retirement. Being in your 20’s, you have umpteen years of compounding interest and investment opportunities to get where you want to be. Doing any saving at all puts you in a good place. Keep it going.

    1. I feel, Hayley, that you’re just at a great time to really do something about your future. You obviously take the time to think about retirement and by going through the checklists and options that can build your retirement funds now, you still have the advantage of time and compounding. It sounds very simple but the sooner that you embark on serious retirement funding, the easier and more certain your retirement future will be.

  5. LNWeaver

    That’s interesting that you think taking all your money out of the stock market is a risk at retirement age. I guess there are low risk stocks and indexes. Indexes are groups of stable stocks and they carry less risk than an individual stock.

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