How Long Will My Retirement Savings Last?

How Long Will My Savings Last in Retirement?

The amount of time your savings will last depends largely on your preferences and circumstances, with the added impact of how the market performs. Here are the variables that can affect your total retirement savings:

• Savings rate: The more you save long before you retire, the more you’ll likely have in retirement—and the better positioned you will be to ride out any dips in the market in the meantime. Fidelity recommends saving at least 15% of your pretax income for retirement per year. Or you can use age-based retirement savings targets: Save the equivalent of your yearly salary for retirement by age 30, three times your salary by age 40, and so on.
• Rate of return on investments: Your asset allocation—or your personal mix of investments, including stocks, bonds, cash, real estate and more—will help determine what rate of return you can expect in retirement. The higher your return, the more savings you’ll have both at retirement age and when you’re already retired and still investing.
• Expenses in retirement: Your spending in retirement will have a big impact on how far your savings will take you. Certain expenses, like health care, housing and taxes, can all cost more once you retire. You can estimate your spending in retirement using the 70% rule: Calculate 70% of your pre-retirement, post-tax income per month and use that as a guideline for what you’ll spend, and therefore what you’ll need to have saved.
• When you plan to retire: Retiring earlier or later than average, and your personal life expectancy, will factor into how long your savings will last.
• Inflation rate: Inflation, or the rise in prices of goods and services year to year, will affect what your savings will actually be worth in retirement. The 4% rule is a guideline that can make sure you’re covered: Experts recommend withdrawing 4% of your total retirement fund in year one of retirement and then aligning your withdrawals with the inflation rate every year thereafter. If the inflation rate is 2.5%, for example, you’d add on 2.5% of your savings to your baseline 4% withdrawal, and so on.

Consider using a retirement savings calculator to get an idea of how many years your projected or current savings will last in retirement. You’ll need a starting retirement fund balance to work with, plus a monthly or annual withdrawal amount and an expected rate of return.

Example: Let’s say you have $500,000 across all retirement accounts when you retire at age 68. If you withdraw an average of 5% of your savings annually, at a conservative 3% rate of return, your savings will last for a little over 30 years.

Best Ways to Save for Retirement

There are several options for retirement funds, and the best choices for you often depend on your employment situation.

• Traditional or Roth 401(k): You can save for retirement directly from your paycheck via an employer-sponsored traditional 401(k), which is taxed when you withdraw the money in retirement, or Roth 401(k), which is taxed now. Many employers offer matching dollars, which means they will contribute to your retirement account (usually up to a certain percentage of your pay) if you do.
• SIMPLE or solo 401(k): These options are for small business owners with employees and without, and function similarly to 401(k)s at larger companies.
• Individual retirement account: If you don’t have access to a 401(k) or want to supplement one, you can also choose a traditional or Roth individual retirement account (IRA). Contribution limits are lower for IRAs than 401(k)s, but they can be a useful tool particularly to balance out tax treatment between traditional and Roth accounts (by choosing a traditional 401(k) and Roth IRA, for example).
• Brokerage account: You can also invest in a taxable brokerage account, which has fewer tax benefits than retirement-specific accounts like 401(k)s or IRAs but more flexibility.
• Health savings account: If you’re already enrolled in a high-deductible health insurance plan, a health savings account (HSA) will let you save for medical expenses pretax—and invest that money tax-free.

Learn more >> How to Save Money for Retirement

How to Make Your Savings Last Longer

Here’s how to give your retirement fund the best chance of supporting you for as many decades as you’ll need it to.

Maintain Some Investment Risk

Investing very conservatively in retirement might mean losing out on worthwhile growth, especially if you will be retired for a long time. It’s wise to keep a good chunk of savings in low-risk investments or a high-yield savings account. But you can also continue investing in stocks and bonds that carry some risk, and potential reward.

Draw on Social Security Strategically

The longer you wait to start receiving Social Security benefits, the more you’ll get. While you can collect Social Security beginning at age 62, each year you wait until age 70 will net you 8% more in payments annually. While this ensures you’ll receive a higher amount throughout your lifetime, you might decide receiving benefits earlier makes sense. If your family medical history and personal health mean you aren’t planning to live into your 90s, or if you’d rather keep your investments intact to allow for growth over a longer period, collecting Social Security earlier could be a sound move.

Consider Investing in Inflation-Friendly Assets

To prevent inflation from taking too large a chunk out of your savings, include assets that keep up with inflation in your investment portfolio. One option, for example, is to invest in real estate that you can then rent out. That means you’ll earn income in retirement that can increase along with inflation.

What to Do if You Haven’t Saved Enough for Retirement

There are a lot of options for bumping up your savings if you’re concerned about making them last through retirement. Start with these:

• Make catch-up contributions to your retirement accounts. Several retirement accounts allow savers ages 50 and over to contribute more than the typical annual maximum. If you meet the age requirements, 2024 IRS rules allow you to save an extra $7,500 in certain types of retirement plans, including 401(k)s, bringing the total annual contribution limit to $30,500 instead of $23,000.
• Maximize your benefits. If possible, aim to wait to draw on Social Security until age 67 so you receive 100% of the benefits you’re entitled to. That could mean working longer, even if part time. Waiting to retire at least until you’re eligible for Medicare at age 65 will also help you save money on health insurance.
• Increase your income. If you have several more years before retirement, upping your income by earning new credentials or opting for a higher-paying job will free up more money for savings. A new employer may also offer a better 401(k) matching program.
• Downsize your home. Limiting housing costs, particularly if you’re an empty nester who needs less space, can give you a big chunk to put toward savings and help you get used to a leaner lifestyle in retirement.

Learn more >> What to Do if You Don’t Have Enough Retirement Savings

The Bottom Line

Saving for retirement can feel like an exercise in the abstract, until it’s suddenly reality: You’re nearing retirement age and it’s time to evaluate whether you’ve saved enough. First, use a calculator to identify where you stand now and how long your savings will last. Then make a plan to increase savings or scale back on expenses if you’ll need to. With forethought, you can dodge any surprises in retirement and get as close to your ideal post-work lifestyle as possible.