How To Avoid Outliving Your Savings How To Avoid Outliving Your Savings

There’s a good chance, no matter your tax bracket, that you’ve worried at some point that you may outlive your savings.

This fear is not totally unrealistic for a few valid reasons:

  • People are living longer, but with more chronic illnesses.[1]
  • The cost of living and medical expenses continues to increase[2]
  • Fewer people (only 23%) aged 51-65 will have a pension to draw on[3]
  • More Boomers are entering retirement with debt than the previous generation.[4]

The good news is, that with a little planning and some forward thinking, you can stave off some that anxiety and get on track. Below we will go over 5 steps that can help you to better picture your retirement and come up with a realistic plan to pay for it.

Set Retirement Goals

For so much of our lives, retirement is an abstract idea. Now, as it draws nearer, the first step is to come up with some realistic goals for your retirement. How will you spend your days? Where would you like to live? When is your spouse planning to retire? How is your health? By asking and answering these questions, you can better understand what you want to do in your retirement (and where) the better you can come up with the number you need to support it. This step should be fun as it is really all about you. What have you wanted to do but never had the time? What are you passionate about? So many things like mentoring, volunteering, investment clubs, your local gym, will not only give you purpose but help you to make new friends and become more active in your community. You may also want to go back to school, or travel, or even continue to work part-time.

Make a Retirement Budget  

Now you know what you want to do all day, the next step will be figuring out how to pay for it. This is most likely the step that is giving you stress. First, factor in all your expenses, housing costs, insurance, food, etc. Next, look at all your debts, especially those with high interests (like credit cards). Factor in money for things like trips, holiday presents, and going out to eat. Also factor in some money for unexpected costs. Now add that all up. Are that number and the amount you have saved synching up? If so, then great! You are right on track. If they aren’t, don’t panic. The good thing is you have time to work on that and get help.

Assess Your Savings

So, you know how you want to spend your time and you’ve created a budget. Looking at your savings though, it isn’t looking sustainable long term. The first step is to get on top of your debt because you don’t want to be paying compounding interest on a fixed income. The less you owe across the board when you retire: be it house, car, credit card, student loan, the better. On the saving side, start putting more away and make sure to max out any employer match contributions. This may be a good time to get frugal, look over your extraneous spending, and get to chopping.

Studies found the average American spends $1497 a month on non-essentials like takeout, streaming services, and impulse purchases.[5] The average person pays over $200 a month on subscription services alone (like cable and cell phone bills).[6]

It may be a good time to cut your cable, downsize to a cheaper car, or cancel your expensive unused gym membership. You may be amazed how much money gets wasted that could be going toward your savings and debts.

Get Help

You have a plan, you have a budget, and you are working to get to your financial goals. The next step? Get some help. The average person sees a 4-6% increase in value using a qualified financial adviser.[7] There are varied experts depending on your particular needs so do your homework. You may also want to look into online savings tools, like Mint (https://www.mint.com/) or Personal Capital (https://www.personalcapital.com/)

Adjust Your Plan as Needed

Last step! This one can be a harder one but will give you the peace of mind heading into retirement. You need to have some flexibility, like everything in life.

37% of American workers reported having to retire earlier than planned due to health or health of a relative.[8]

If even after you save, cut back, seek out financial counsel, all of it, you are still unlikely to be able to afford your retirement as you designed it, then it’s time to tweak the blueprints. For example, downsizing to a smaller more accessible home or condo may be a more economical choice than staying in your large family home. Relocating to an area with lower taxes and cost of living can free up more money to put toward your retirement fund. Moving to an area that is more walkable and has reliable public transportation could allow you to downsize to a single vehicle or no car at all. No matter what, the goal is to retire well and comfortably for the long term, which could be multiple decades. Approaching the goal frugally and treating your retirement plan as a marathon and not a sprint, may make all the difference.


[1]https://www.theguardian.com/society/2018/jan/23/well-live-longer-but-suffer-more-ill-health-by-2035-says-study

[2] https://www.cbsnews.com/news/cost-of-living-2018-increasing-at-fastest-rate-in-10-years/

[3] https://www.ssa.gov/policy/docs/ssb/v69n3/v69n3p1.html

[4]https://www.forbes.com/sites/tedknutson/2018/10/24/living-standards-could-suffer-from-by-heavier-debt-by-continuous-generations-of-retirees-warns-study/#548acccb7639

[5]https://www.usatoday.com/story/money/2019/05/07/americans-spend-thousands-on-nonessentials/39450207/

[6]https://www.theladders.com/career-advice/survey-84-of-americans-unaware-of-how-much-they-spend-on-subscription-services.


[7] https://www.forbes.com/sites/robertlawton/2018/08/13/fiduciary-investment-advisers-may-add-more-than-6-in-value/#6f254b2a1b81

[8] https://crr.bc.edu/wp-content/uploads/2019/01/IB_19-3.pdf


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About the Author

Bob Hanna

Bob Hanna

Bob feels strongly that you only retire once leaving no room for mistakes. He is dedicated to building and more importantly preserving investors assets. Bob is a Financial Advisor with Cambridge, an independent broker-dealer, honored to be among the most respected firms in the industry.

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