How Long Will My Retirement Savings Last? (2024)

Note – The following post is the 2^nd in a series of retirement education blog posts on Money Q&Aand sponsored by USAA. Be sure to check out the 1^st article, “Am I Saving Enough for Retirement?”. Like always, all opinions are my own.

If you’re worried that you’re doomed when it comes toretirement, then you might be surprised by how many options there are forsupplementing and stretching your retirement income.

Now that you’ve put a great deal of thought and planning into your retirement investing, as you start to look at retirement as it comes closer, now is the time to consider how you are going to start withdrawing your money from your retirement plans. Your withdrawal strategy is one of the most important factors to maintain financial success during retirement.

Taking out too much from your retirement investments canlead to a shortage of funds in your golden years. The last thing you want is tohave to go back to work during retirement.

On the other hand, if you aren’t spending enough duringretirement, you could see a lower standard of living than you anticipated. Youwant to be able to enjoy your retirement after all.

However, your retirement plan, and ultimately, the amount ofwithdrawal you make from your retirement accounts depends on your uniquecirc*mstances. That is why you should consider seeking out help from aqualified financial advisor like the advisors at USAA.

It’s essential to understand how long your retirementsavings will last after you’ve spent your entire career squirreling the nestegg away. To determine whether your retirement savings will last for theduration of your retirement, you should consider several factors and questionsto ask yourself before retiring.

Cover the Essentials

One of the most important pieces of advice that financial experts and other retirement planning advisors tell their clients is that you should make sure to cover your non-discretionary expenses (housing, utilities, food, routine health appointments/prescriptions, etc.) with your guaranteed income (i.e., Social Security, pension, and fixed annuities).

By covering essential expenditures with your guaranteedmonthly income streams, you’ll never have to worry about whether you have toskip meals or showers during the month to save money if your retirement investmentaccounts are on the brink for whatever reason. You can always resort totemporary money-saving measures for discretionary expenses like Netflix ordining out, but your housing arrangements, utilities, and food are necessitiesthat should never be at risk for late or non-payments.

Assess Your Current vs. Projected Budget

Your budget during retirement might not go down as much asyou’re expecting – in fact, you might spend more money as a retiree than you didwhen you had a full-time job! The reason for this is you’ll now have more timeto spend on hobbies, traveling, dining out, etc. There’s also the question ofhealthcare and how much you thinkyou’ll spend versus how much you actuallyend up spending if an unexpected illness or injury occurs.

Since everyone is different, general advice when it comes tobudgeting for retirement is that you should neverexpect your budget to decrease, even if you do plan on downsizing your home andlifestyle. If anything, you’ll want to overestimate how much money you mightneed each month/year during retirement and calculate how long your current nestegg might last based on that assessment.

Bengen’s 4% Withdrawal Rule of Thumb

There are huge unknowns when it comes to planning forretirement, but financial advisor William Bengen’s 4% withdraw rate rule offersa good rule of thumb for withdrawals to help you start your calculations. Over40 years ago, William Bengen, a financial adviser, developed what is now knownas the 4% withdrawal rule, which basically states that you should withdraw nomore than 4% of your nest egg in the first year of retirement.

Then, withdraw the same amount each year after that withanother 4% after factoring in to account for inflation. The 4% withdrawal rule generally dictates that you should beable to maintain this withdrawal pattern for 30 years or more without runningout of money.

The main issue with this rule is that it doesn’t account forfluctuating interest rates, skyrocketing healthcare costs for seniors, complextax laws for different types of investments, and possible lifestyle upgrades ordowngrades you may experience during retirement. Nevertheless, the 4% withdrawrule is a good foundation for your retirement planning strategy.

But everyone’s situation is different. Retirement is not aone size fits all experience. Proper retirement planning depends on eachperson’s unique circ*mstances. You should customize the rule of thumb for yourretirement situation and current tax regulations.

Growing Your Portfolio During Retirement

Rather than focusing solely on making your retirement savings last from the moment you leave the workforce, why not put more effort into setting up new passive income streams and making your money work for you once you’re no longer working? For instance, you can replace your income during retirement with dividend reinvestment plans (DRIPs), which automatically reinvest any quarterly dividends you earn as a shareholder back into your account to maximize your long-term gains.

I also like investing in dividend aristocrats. You can even find a dividend aristocrats ETF to help you invest in the entire category.

You can also grow your portfolio by continuing to invest inan IRA after you’ve retired.Investing in an IRA during retirement (assuming you have some taxable income)is an option for folks who continue to work as part-timers, independentcontractors or freelancers while they’re retired, since it’s a requirement forIRAs to be funded by earned income (moneyfrom a job, not just your Social Security check reinvested into an IRA).

Additional Income Opportunities

If you want to quit working for someone else but you don’t have enough money toretire on permanently, then there are plenty of freelance gigs andself-employment opportunities for seniors that you could p. For instance, youcould make money driving for Uber, Lyft, or a food delivery service; you couldalso make money with your creative and/or professional skills through online freelancemarketplaces like Fiverr.

If you’d rather make money with minimal effort, then youcould rent out aroom in your home (or your entire home, if you own it) on Airbnb. Rentingyour home or a room will allow you to meet people from around the world andsupplement your retirement income without much work aside from communicatingwith guests and light cleaning after your guests depart.

There’s no predicting the markets, future tax policies andcosts of healthcare, food, and other ongoing essential expenses. However,following the tips above can help you maximize your retirement spending andsaving strategies and decrease the nightmarish likelihood of running out offunds during retirement.

Targeted Retirement Funds

If you’re looking for a single solution for your retirementinvestments, you may want to consider USAA’s target retirement funds. Thesetarget date funds automatically adjust their risk level as your targetretirement date gets closer.

The USAAManaged Portfolio® (UMP) Wrap program also offers a professionally-managed,diversified portfolio that can help you build your retirement savings. Speak toan advisor to help you open a UMP Wrap account. With a qualifying level ofassets, our portfolios invest in:

• Mutual funds.
• Exchange-traded funds (ETFs).
• Individual stocks and bonds.

After you open your UMP account, USAA conducts periodicreviews to help you stay on track. That’s why talking to a professional likethe ones at USAAto get advice is so important.

Tools and Calculators Are a Great Starting Point

Retirement is not a one size fits all experience. The properretirement planning depends on each person’s unique circ*mstances.

Find out if you’re on track to meet your retirement goals.To get more details on your retirement planning needs, check out USAA’sadvanced retirement calculators. They can help you determine how long yoursavings could last. You tell the calculators how much you’re saving and how youtypically invest. Then, they will show you how much you may need to retire.

You can also discuss your results with a USAAadvisor. Tools and calculators are a great starting point. But then anadvisor can help make sense of the data – especially if an advisor is free!

USAA Financial Advisors can help you:

• Review your savings strategy.
• Determine how long your savings could last.
• Help protect your savings from market volatility.

Get yourretirement review today.

Call800-531-3392tospeak to an advisor.