How long will my money last?

jANUARY 19, 2024

Are you worried that your money won't last throughout your retirement? Learn ways to protect your retirement savings with a financial plan you can feel confident about.

How long will your money last? Or, put another way, how much money do you need to retire?

There are few guarantees in life – especially in this uncertain economy – and your retirement money lasting as long as you need it isn’t one of them. Fortunately, with a little intentionality, there are ways to protect your savings with a financial plan you can feel confident about. You just need to be realistic about your numbers and your lifestyle. 

Jackson research shows that many consumers believe they will consistently spend less in retirement as time goes on. Nearly half of consumers who are age 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. Perhaps some of them have seen their rosier expectations shaken by the reality of things like market volatility, inflation, and lifestyle expenses.

So, if you’re counting on lower expenses as you age to give you the retirement you deserve, perhaps it’s time to recheck your numbers and make sure your expectations align with reality.

How much money do you need to retire?

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 at that point in your life, and which ones will follow you into your golden years? Consider expenses like:

  • Housing
  • Vehicle repairs and replacement
  • Healthcare
  • Utilities
  • Food
  • HOA Fees
  • Taxes
  • Travel
  • Gifts

Next, you’ll need to weigh your monthly retirement income – such as your investments, pension benefits, and Social Security checks – against your monthly anticipated expenses to get a monthly gap number.

Your financial professional can be a great help with the next step of the process: figuring out how long you can draw down on your savings and investments to fill any monthly gap. You can decide how long you need your money to last based on average life expectancy, family history, and 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. To make it easier for you, we’ve created the Jackson 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 review this information with your financial professional to ensure you’ve got all the basics covered. 

What if I don’t have enough money?

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 retirement benefits, you can increase the amount of those monthly checks by postponing 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. You pay a lump sum up front and receive regular monthly checks. There are many variations on annuities, as well as pros and cons, annuities, so be sure to work with your financial pro 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 part-time job may be the way to do it. You can limit your employment to just a few hours a week if that meets your needs. You can work from home (or online) if you prefer or take a job in a shop or office if you could use another reason to get out of the house. You may even expand your social circle, something that can be hugely important as your former work friends recede from your life. 

Ensuring you have money for as long as you’ll likely need it is essential to sound retirement planning. Fortunately, there are ways to assess your status – and to get back on track if needed. Ask your financial professional for help.

Annuities are long-term, tax-deferred vehicles designed for retirement and are insurance contracts. Variable annuities and registered index-linked annuities involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met. Add-on living benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity and may be subject to conditions and limitations. There is no guarantee that a variable annuity with an add-on living benefit will provide sufficient supplemental retirement income.

Jackson, its distributors, and their respective representatives do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended or written to be used and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Tax laws are complicated and subject to change. Tax results may depend on each taxpayer’s individual set of facts and circumstances. Clients should rely on their own independent advisors as to any tax, accounting, or legal statements made herein.

Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York, by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York).  Annuities are distributed by Jackson National Life Distributors LLC, member FINRA. These contracts have limitations and restrictions. Jackson issues other annuities with similar features, benefits, limitations, and charges. Contact Jackson for more information.

Jackson® is the marketing name for Jackson Financial Inc., Jackson National Life Insurance Company®, and Jackson National Life Insurance Company of New York®.