5 Ways to Help Your Money Last in Retirement

July 11, 2024

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When it comes to retirement planning, we often talk about how to start and build your nest egg. But it’s also important to make sure your savings will last through your retirement years, which could run anywhere between 10 to 40 years.

Broadly speaking, market volatility, investment risks, and spending habits are just some of the challenges that could chip away your retirement savings.

The good news is there are a few things you could do to help minimize the risk of running out of money in retirement. First, it’s always a good idea to go over your retirement plan with an experienced financial advisor who can help you assess your retirement readiness. In other words, will you have saved enough for retirement?

Here are five ideas that can help you get that conversation started.

1. Pay attention to retirement account withdrawals

As you begin to lean on your retirement savings for income, keep an eye on how much and how often you’re withdrawing from your accounts. Why is your withdrawal rate important?

First, spending too much too quickly increases the chances of you outliving your savings. Sticking to the spending budget you’ve made for your retirement years is key to avoiding overspending.

Second, withdrawing more money than you need from your accounts in the early years of retirement can sap your investments’ ability to weather economic downturns as well as their potential to deliver sufficient growth over time.

When it comes to figuring out how much to withdraw from your retirement savings, financial experts generally recommend following the 4% rule. This is where you withdraw no more than 4% of your savings in the first year of retirement. Then in the years after, you may adjust the withdrawal amount to account for inflation.

This isn’t a hard-and-fast rule. You may find that you need to withdraw less or more than the 4% rule. Each person’s financial situation is unique, and figuring out an appropriate withdrawal rate is a balancing act. Take out too much and you run the risk of outliving your retirement. But if you take out too little, you may not be able to have the retirement lifestyle you want. A key to success is to be flexible and determine a sustainable spending rate over the course of your retirement.

While there are tools online that can help you crunch the numbers, it’s a good idea to work with a retirement planning expert to create a realistic withdrawal plan that’s based on your budget, investment mix, risk tolerance, and life expectancy.

2. Review your investment allocations regularly

When you’re in retirement, generally, the mix of investments (or asset allocation) in your retirement accounts should be made up of less risky assets. One way to think about this is perhaps holding more bonds and fewer stocks in your portfolio.

Because your asset allocations can shift over time, it’s important to regularly check in on your allocations during retirement to make sure your investments are not exposed to more risk than you’re comfortable with and that they can deliver sufficient growth to help you keep up with inflation.

3. Consider contributing to an HSA

Keep putting money into your Health Savings Account (HSA) during retirement if you can. Under IRS rules, generally, to qualify for an HSA, you must meet these requirements:

You’re covered by a high deductible health plan.
You are not enrolled in Medicare.
You cannot be claimed as a dependent on someone else’s tax return.
You have no other health coverage (some exceptions may apply).

If you qualify, having a dedicated account for covering qualified medical expenses could save you from having to dip into your retirement accounts to pay for these costs.

Remember also that HSA contributions, up to a specific amount, are tax deductible, which can help lower your tax bill.

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4. Don’t forget about cash savings

Hopefully you’ve built up a sizable cash reserve in your working years. The money that’s in your savings accounts can come in handy when it comes to covering your daily expenses in retirement. This cash cushion outside of your retirement accounts can be particularly helpful during a market slump, a time when you want to avoid tapping into your investments for spending money.

If your cash is sitting in a traditional savings account, you might want to consider also opening a high-yield savings account.

A high-yield account can be a great place to park your money since it typically offers a higher interest rate than a traditional savings account. Combine that with the power of compound interest, and you can really take advantage of the higher rates.

5. Explore a second career

If you can (and want to), keep working by starting a second career. This doesn’t have to be a full-time job or anything stressful. It can be something you enjoy doing part-time. Maybe there’s a dream job that you’ve always wanted to try out but weren’t able to because of your day job and other obligations.

Depending on where you live, there could be plenty of options to stretch your creative legs and explore what’s out there. The upside is that you can use that extra income to build up your cash reserve and reduce the amount you need to withdraw from your retirement accounts. It may even help you postpone taking Social Security benefits (which usually means a bigger benefits check down the road).

Learn more: Working After Retirement

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.