How Can I Avoid Running Out of Money in Retirement?

What’s scarier than death? Outliving your retirement savings and investments, according to many Americans.

A 2025 Allianz study reported that 64% of Americans fear running out of money more than they fear dying, a concern particularly prevalent among Gen Xers.

As life expectancies continue to climb, the thousands expected to retire each day for the next decade or so have to increasingly account for longevity risk when managing their portfolios.

Think about it, your retirement may stretch 20-30 years or more.

Furthermore, getting older comes with an increased risk of cognitive decline that can affect your ability to properly manage money. Consider a study published in Neurology that detected a relation between declining financial skills and cognitive impairment.

So in a sense, a danger to some people’s retirement savings and investments is their own selves.

Fortunately, you can quell those fears with the right financial planning steps. Here are some steps that can help people manage their retirement assets as they age.

Simplify and diversify your portfolio

Figuring out how to utilize your various income sources – retirement accounts, pension, Social Security, rental income, etc. – to fund your retirement needs can be complicated.

For example, after a long career you may have multiple 401(k) accounts. Therefore, it can help to streamline your finances as much as possible.

You can simplify your investments by consolidating some of your accounts. That reduces the number of income sources to keep track of, while also giving you greater control over your money.

Just keep in mind consolidating may not make sense for everyone. Some 401(k) plans offer benefits, protections or lower costs that you’d give up. So consult your financial adviser to see what makes sense for you.

Additionally, diversifying your portfolio – owning several types of investments – can help reduce risk and generate a steadier return.

Don’t become too conservative

As you near retirement, it generally makes sense to lower your risk exposure, meaning a lower stock allocation in your portfolio. But, you still want to keep pace with inflation over a long retirement.

Therefore, you likely need some risk assets like stocks to help potentially generate growth, even though your investment objective isn’t to accumulate earnings as you did before.

Designate a durable financial power of attorney

A power of attorney (POA) is a written document that allows you to designate someone to legally act on your behalf, either immediately or upon your incapacity.

If you suffer from a severe cognitive disability, a durable financial power of attorney, who may access your financial information, can help monitor and manage your assets and decrease the chances of you becoming a victim of financial exploitation or scams.

Prepare for health care costs

One way to keep your nest egg afloat is to prepare for the thing that will likely be the biggest drain on your finances in retirement: health care.

Remember, Medicare, which you are required to enroll in at age 65, does not cover everything. So, make sure you have the right amount of coverage.

Also, build a sizeable emergency fund to help cover any unexpected out-of-pocket medical costs. Finally, take preventive steps now, from routine physicals to eating a healthy diet, to lower your need for medical care in the future and, subsequently, reduce its strain on your finances.

Read the fine print

Some financial products are heavily marketed on TV and in the news. Often, they sound too good to be true; and, often they are. When considering a financial product, always read the fine print.

Annuities, for example, are attractive to many investors because of the income guarantee. However, these insurance products can be expensive and come with many confusing restrictions and high penalties that may override their potential benefits.

Maintain a flexible withdrawal rate

The amount you can safely withdraw from your portfolio depends on many factors, including your wealth, annual expenses, financial goals, other income sources, the age you retire and the market.

You may never have to deviate from your initial withdrawal rate. Yet, your personal needs or market conditions are likely to change, and may do so unexpectedly, rendering your withdrawal rate unreasonable. If you’re flexible with your rate, you can adapt to change by scaling back and preserving your savings until things improve.

Work with a financial adviser

In all of life’s pursuits, it helps to have someone at your side. The same goes for retirement planning and asset management. A financial adviser can provide an objective voice to help you make smarter financial decisions.

Additionally, an adviser can help work toward preserving your money by not only monitoring the financial markets but also you. An adviser can act as a financial coach to help you avoid any suboptimal financial decisions, as well as encourage to use your money to live out those big retirement dreams.

Living longer is something we should all be thankful for. But for investors, it comes with a set of risks beyond the workings of financial markets. Still, you can also manage these risks and potentially avoid outliving your retirement savings with proper financial planning and guidance along the way.