How Long Will My Retirement Savings Last?

Published on: Apr 11, 2024
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By Pete Benson, Co-founder of Beacon Capital Management.

Here at Beacon, at some point, you might hear us say, “Play now, pay later. Or pay now, play later.” That’s a simple reminder that the decisions you make today have a direct impact on your future.

Understanding which factors in your life now will affect your life in retirement is a crucial step of financial planning. In this article, we’ll help answer a question we hear all the time: “How long will my retirement savings last?” We’ll look at factors like:

  • Your lifespan and longevity
  • The influence of market returns
  • Strategies to maximize tax efficiency
  • Possibilities to extend your retirement savings

Start with answering these five questions below, and keep reading to plug your numbers into our free calculator…

1.      How much do you have in retirement savings?

Before you can know how long your savings will last, you need to know the dollar amount you’re working with. It doesn’t have to be 100% exact, but it should be close.

There are several places you may have retirement savings:

    • Employer-sponsored 401(k) or IRA
    • Roth IRA or Roth 401(k)
    • Stocks
    • Bonds
    • Pension
    • Certificate of Deposit
    • Savings account

Diversifying your portfolio now can lead to greater stability in your retirement years.

2.      What other sources of income will you have in retirement?

Of course, your retirement savings isn’t the only income you’ll have to rely on. Don’t forget about two other common income streams: Social Security and real estate or rental property income.

Social security

This government program provides financial benefit to retirees. Your earnings history and the age you begin receiving benefits will determine the amount this check will be each month. Social Security should never be the only thing you rely on in retirement, but it is a cornerstone of your income plan.

Real estate

If you’ve invested in real estate, you may plan on using it as a supplemental income source in retirement. Whether you rent it out to a long-term renter, open an Airbnb, or sell at a profit – real estate can be a great way to diversify your retirement savings and income streams.

3.      When do you plan to retire?

When you’re determining how long your retirement savings will last, you might be surprised by the difference a few years can make. If you plan to retire early, your savings obviously needs to last longer. If you delay retirement, it gives you more time to save aggressively while also delaying withdrawals.

There is no universal perfect age for retirement – the decision is highly specific to you and your unique situation. Have a discussion with an experienced financial advisor to figure out the ideal time for you to leave the work force.

4.      How long could you live?

What is your life expectancy? Consider the medical history of your parents, as well as how healthy and active you are.

With advances in healthcare and lifestyle, people are living longer, requiring savings to stretch further. In fact, according to the CDC, the average American adult is expected to live to 76 years old.1

5.      What will your retirement lifestyle look like?

Your anticipated lifestyle in retirement also significantly impacts how long your savings will last. So, how much will you spend each month?

There are many ways to cut costs when you’re retired, but perhaps the biggest way is to be content at home. Morgan Stanley found that people who spend more time pursuing interests at home in their retirement years—like entertaining friends and family, or doing house projects, like remodeling—are more likely to be able to cover the cost of their lifestyle compared to those who travel most of the time.2

You’ve worked your whole life to enjoy your golden years, and we believe you should – whatever that looks like for you. Just make sure your monthly retirement income is enough to cover your wants and needs.

How Long Will My Retirement Savings Last? Run the Numbers

Retirement calculators can be a powerful tool in determining the lifespan of your savings. Our free Retirement Savings Calculator considers factors like your current savings balance, expected investment returns, desired retirement age, and inflation rates. By entering these details, you can get an estimate of how long will your money last in retirement.

Your details

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Discover how much you could potentially have in your retirement savings by using this easy, step-by-step calculator.
Please include the total of all of your investment accounts, including 401(k)s, IRAs, mutual funds, etc.
Play around with this number to see what could happen to your nest egg if you save even more!
A conservative estimate is around 6%.
Do not include the %
The average rate of inflation over the past ten years is 1.88%

Are you happy with your numbers? If not, there are strategies to help your retirement savings last longer.

For example, working part-time during retirement not only provides additional income but also allows your savings to continue growing. Adjusting your investment portfolio to a more conservative approach as you near retirement can also help safeguard your savings from market fluctuations. In “Start Late, Finish Rich,” author David Bach implores adults in their forties or beyond to put two hour’s worth of their pay into a pretax retirement account every day.

The Impact of Market Returns on How Long Your Money Will Last

Don’t forget the effect of market returns on your retirement savings. Your rate of returns plays a significant role in determining how long your retirement savings will last.

Insights from the stock market’s performance over the years can prove invaluable for making informed investment decisions. As I said before, diversifying your portfolio can help spread your investments across different asset classes, reducing the impact of market volatility and protecting your savings from significant losses during market downturns. Balancing risk and reward is also crucial for the long-term sustainability of your savings.

It’s imperative to work with a fiduciary financial advisor to make sure your portfolio can withstand a volatile market.

Maximizing Retirement Income and Tax Efficiency for Savings Longevity

Maximizing income and ensuring tax efficiency are crucial considerations when planning for retirement. Understanding federal taxable income brackets, implementing tax-efficient withdrawal strategies, and utilizing tax-advantaged accounts can help you make the most of your retirement savings.

Developing withdrawal strategies that minimize the tax impact on your retirement income is key to tax efficiency. Instead of taking large lump sum withdrawals, consider implementing a systematic withdrawal plan, allowing for gradual withdrawals and potentially reducing your taxable income.

Utilizing tax-advantaged accounts like traditional IRAs, Roth IRAs, and employer-sponsored retirement plans can also help maximize retirement income and tax efficiency. These accounts offer various tax benefits, including tax-deductible contributions, tax-deferred growth, or even tax-free withdrawals under certain conditions.

By strategically allocating your retirement savings across these accounts, you can optimize tax advantages and potentially increase your retirement income.

If you have questions about financial strategy or would like our free assessment of your retirement plan, please contact our firm today. We are here to help you feel confident in your overall financial button


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