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How Long Will My Money Last in Retirement?

Ben Geier, CEPF®
how long will my money last

Retirement can be a wonderful time when you get to relax, explore your passions and spend time with your family. No matter how carefully you’ve planned for this period, though, you may find yourself asking: How long will my money last now that I’ve stopped working?

It’s understandable if you are concerned. If you don’t know how long your money will last, you could be in for a rough surprise. This guide will walk you through figuring out how long your money will last in retirement based on your current savings and expected expenses.

How to Figure Out How Long Your Money Will Last

Figuring out how long your money is going to last in retirement is a pretty simple mathematical calculation. You need to know how much money you have, how much money you expect to bring in during retirement and approximately how much money you spend each year. When the sum total of your years of spending outpaces your current savings plus future income, that is when you know you’ll be out of money.

One thing to think about when making this calculation is that the amount you’ll spend each year might change. For instance, if you are currently living in a single-family home with your children, your rent or mortgage payment might go down if you move to a smaller condo or apartment after you retire. You also might move to a less expensive part of the country, where housings costs and the cost of food and other necessities is less.

On the other hand, there are some areas where you may end up spending a lot more  as you get older. The obvious example is healthcare costs. If you’re relatively health when you’re 55, your healthcare costs will likely be low. No matter how well you take care of yourself, though, you’ll probably be spending more on healthcare as you age.

While these variables prevent you from making exact calculations, it’s important to take into account these spending changes when figuring out how long your money is likely to last. The other variable you won’t be able to predict is how long you’ll live — in other words, for how many years you’ll need to save. Ideally, you’ll have some buffer room in your retirement savings to account for this.

How Much Is in Your Retirement Accounts?

how long will my money last

Once you’ve figured out how much money you’ll need year-by-year, you need estimate how much money you’ll have by the time you reach retirement. If you’ve been using a retirement account like a 401(k), that’s the first place you should look.

Obviously, you can just look at your account and see how much money you have in it. That is a good place to start. You’ll want to keep in mind, though, that the money in your 401(k) is accumulating interest. To get an accurate picture of how much money will be in your 401(k) account when you retire, you’ll need to keep in mind these capital gains. SmartAsset’s 401(k) calculator can do that for you.

Don’t forget to also take into account any other retirement accounts or products you own. This includes individual retirement accounts and annuities.

How Much Social Security Are You Receiving?

With all the focus on retirement savings, it can be easy to forget that you will also be receiving some money from the government once you’ve retired. You can expect to get a check every month that will supplement your bank account. While you probably don’t want to plan on living off of this, it will be part of the equation.

SmartAsset’s Social Security calculator can tell you what you can expect to make each year from Social Security, based on your age, annual income and expected age of retirement.

When Do You Want to Retire?

how long will my money last

The last thing you need to know is when you will retire. If you’ve already retired, this obviously doesn’t apply to you. When you’re figuring out when you want to retire, make sure to take into account things like pensions. Also keep in mind any expenses that might make it necessary for you to continue working longer. This may include things like paying for children to go to college or paying off any debt you may have.

Once you’ve worked out when you plan to retire, you can start to calculate how long your money will last in retirement.

The Bottom Line

Knowing how long your money will last in retirement is an important part of planning for your future. You’ll want to know how much you spend each year and what age you plan to retire. You also need to know how much money you’ll have saved and what you’ll make from Social Security. With those numbers in mind, you can estimate how long your retirement funds will last.

Tips for Retirement

  • If you need help figuring out how long your money will last in retirement or want to work on saving more, talk to a financial advisor. SmartAsset can help you find the right one for you. Our free financial advisor matching service matches you with up to three advisors in your area. All you have to do is answer a few questions about your financial situation and goals. All of our advisors are fully vetted and don’t have any disclosures.
  • When planning for your retirement, make sure to remember that some life events could drastically derail your retirement. For instance, your kids could move back home or your spouse could require long-term elder care.

Photo credit: ©iStock.com/MarioGuti, ©iStock.com/AleksandarNakic, ©iStock.com/designer491

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