How long will my money last?

Have you ever wondered, "How long will my money last?"?

It can be a daunting concern—especially in today's economy—and numerous factors come into play to shape that answer for you.

The good news is this: Gathering information and being intentional can help you protect your savings with a financial plan you can feel confident about. In this article, we can help you begin to know how long your money will last.
 

Be realistic about your numbers and your lifestyle

Jackson research shows that many older adults believe they'll spend less money as they get older. Nearly half of consumers 70 or younger believe they’ll spend less at age 75.

But the fraction of consumers who continue to think they’ll spend less in the future goes down as their age goes up. Put another way, the older they get, the less optimistic they become about their finances. Perhaps they've seen their rosier expectations shaken by the reality of things like market volatility, politics, inflation and expenses.

So, if you’re counting on lower expenses to give you the retirement you deserve, it's time to recheck your numbers and make sure your expectations align with reality. Take advantage of our free Jackson Retirement Expense and Income Calculator, which can walk you through the process, step-by-step. 
 

What will your expenses be?

Before you can be confident that your money will last as long as you need it, you’ll have to determine the dollar amount you’re aiming for.  

To figure that out, think about how much monthly income you’ll need in retirement. A good baseline is knowing what you spend each month right now. Which of your current expenses can you drop later in life, and which ones will continue or even increase? Consider expenses like:

How much income will you have?

Next, you’ll need to weigh your monthly retirement income—like your investments, annuities, pension benefits and Social Security checks—against your anticipated monthly expenses. The difference between those two numbers might reflect an income gap. A financial professional can be a great help with this process.

If you are showing a retirement income gap, it's time to strategize. Your financial professional can help you determine how long you can draw down on your savings and investments.
 

How does longevity come into play?

Work with your financial professional to estimate how long you need your money to last. This estimate should be based on:

• Average life expectancy
• Family history
• Your personal health factors

If it looks like the money you’ve saved won’t last through your whole retirement, you and your financial professional need to come up with a plan.

We know that’s a lot of math and guesswork. Again, to make it easier for you, try our free Retirement Expense and Income Calculator. Enter your specifics to find out if your projected monthly retirement income will meet your projected monthly outflow and, if there’s a gap, how much it could be. It’s a good idea to bring this report when you meet with a financial professional. 
 

"What if I don’t have enough money to last?"

Fortunately, if you don’t like the estimate you get, there are options you can consider:

• Separate basic and discretionary spending—and how you pay for them.

You may have some “fat” in your monthly expenditure column in the form of discretionary spending, such as eating out, entertainment, vacations and so on. If you can afford to dedicate monthly retirement income to your basics and only draw down from your investments for discretionary income, you make it easier to pause some of that spending and some of your withdrawals, when needed. That way, you can avoid selling assets when the market is in a slump.

• Increase your guaranteed monthly income.

If you haven’t yet started taking your Social Security benefits, you can increase the amount of those monthly checks by delaying your retirement. You can start collecting benefits at age 62, but the amount you receive each month will increase the longer you wait, until age 70.

Another way to increase your guaranteed monthly income is to purchase an annuity. In this case, you would pay a lump sum up front and receive regular monthly checks. There are many variations on annuities, as well as pros and cons, so be sure to work with your financial professional on this one.

• Return to part-time employment.

Sure, you retired—or plan to retire—because you want to do things other than work. But if you have a monthly income gap you need to close, taking up a retirement job may be the way to do it. Working part-time in retirement is becoming more and more popular.  

Retirement is a big deal, and we want you to look forward to that time you've earned. Don't let lingering fears about whether or not your money will last steal that from you. Get a realistic handle on your situation and work with a financial professional to get clarity and confidence today.