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Take These 6 Key Steps and Never Worry About Running Out of Money in Retirement

April 28th, 2021 | 4 min. read

By Jacob Schroeder

running out of money in retirement

Rest easy, dog food is off the menu. By that we mean you can ignore the extreme hyperbole surrounding fears about running out of money in retirement, such as the notion of having to eat Fido’s canned dinner.

Still, one survey suggests that 64% of Americans will retire with less than $10,000 saved, which is essentially as if retiring broke.

Even with a healthy nest egg, a few missteps or severe misfortunes can result in having to readjust your retirement lifestyle. You could be forced to significantly reduce your spending or consider going back to work.

Once you’ve accumulated enough assets to retire, it is important to take certain steps to manage and preserve them. These moves can protect you from the harmful situations that can knock retirement off track. Consider them retirement roadblocks.

Here are a few – and six key steps to help you steer clear of them and avoid running out of money in retirement.

Retirement roadblocks

These are big retirement roadblocks that can put your savings in jeopardy if you’re not careful.

Sequence of return risk

When you retire and start withdrawing money from your investment accounts, your portfolio balance can be affected not just by how much your investments go up or down, but by when they go up or down. Sequence of return risk is the risk that market declines in the early years of retirement, paired with ongoing withdrawals, could significantly reduce the longevity of your portfolio.


Retirement can be for not only enjoying time without work, but also achieving your lifelong goals. However, to ensure your savings last, it is imperative to stick with a reasonable fixed income. Withdrawing from your accounts without an established withdrawal rate is a recipe for disaster.

No emergency fund

If you don’t have a safe cash reserve, you may find yourself vulnerable to unexpected costs and prolonged market downturns. You could resort to withdrawing more from your assets than appropriate or, perhaps worse, putting on debt. An emergency fund of 3-6 months’ worth of expenses will serve as a safety net to cover any unforeseen events and possibly avoid selling investments at loss during a bear market.


Even at a low 1.5% annual inflation rate, what costs you $1,000 today will cost nearly $1,350 in 20 years and more than $1,550 in 30 years. Considering the historical inflation rate, your purchasing power can be cut in half in the same amount of time. Inflation can disproportionately affect older Americans due to differences in spending habits. Healthcare prices, for example, typically rise much higher than those in other categories.

Giving too much to your adult children

According to a Merrill Lynch/Age Wave report, 79% of parents are helping their adult children in some financial way — whether it’s for their weddings, their cell phone bills or groceries. Parents are spending a combined $500 billion on their grown kids (ages 18 to 35) — double what they’re setting aside for their own retirement. There’s nothing wrong with financially supporting your adult children, as long as you’re not putting your own financial security in jeopardy. 

Steps to avoid running out of money in retirement

These planning moves will help you counter those roadblocks so you don’t have to fear running out of money in retirement.

1. Prioritize saving even more during your final working years

As retirement draws near, it’s no time to take your foot of the pedal. Retirement savers can contribute a maximum of $19,500 to a 401(k), 403(b), most 457 plans and the Thrift Savings Plan in 2021. People 50 and older are allowed to make an additional $6,500 in “catch-up contributions” per year to their 401(k). Contribution limits for traditional and Roth IRA plans are $6,000 a year, with catch-up contributions of $1,000 for those 50 and over.

2. Work with a financial adviser

A financial adviser can help answer two of the most pressing financial questions. First, Am I going to be okay? And second, when the economy changes, or the stock markets changes, or your life changes: What should I do now?

One way a financial adviser does this is with a “stress test.” The test essentially evaluates how your financial plan will fare during a future unexpected event, such as a recession or major geopolitical event, and allows you to adjust accordingly. For example, if you are near retirement and your portfolio is heavily invested in stocks, stress testing would allow you to adjust your portfolio in advance to safeguard it from potential future harm, such as an unexpected recession.

3. Reduce risk – but not more than necessary

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

Additionally, diversifying your portfolio– owning several types of investments – can help reduce risk and generate a steadier return. An investment strategy that offers more certainty can be easier to stick with over the long haul.

4. Set 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.

5. Consider your health needs

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. 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. Depending on your current health and family history, you may want to set aside money specifically to help cover any unexpected out-of-pocket medical costs. Also, you should consider the potential for you and/or your spouse needing long-term care. Finally, take preventive steps now, from routine physicals to eating a healthy diet, to help lower your need for medical care in the future – and, subsequently, reduce its strain on your finances.

6. Just say "no"

Financially cutting off your children is difficult, but it’s generally the right move. Remember, your savings are earmarked for a specific purpose: to help support yourself for 20 to 30 years in retirement. It’s true adult children today face a bevy of financial challenges that previous generations didn’t (namely, student loan debt), but they still have the luxury of time and ability to work. You don’t have to completely cut them off, but you should set some limits. Too much financial hand holding can create a terrible cycle. Neglect your retirement too much and then one day your children may be struggling to financially support you.

Want to plan for a comfortable retirement? The earlier you start planning, the better. From choosing the right age to claim Social Security to figuring out where you want to live, there are many important financial steps to take in your 50s that can help increase the likelihood of achieving your financial goals. You can find them by downloading our free ebook: Your Money in Your 50s: A Retirement Planning Guide for Procrastinators and Avid-Savers

Your Money in Your 50s cover -tiltDownload the E-Book Now!