6 Signs You’ll Go Broke in Retirement

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Worried about running out of money in retirement? Pay attention to that fear — so that you can prevent it from coming true. 

retirement Savings

As you look into the crystal ball of your retirement, watch out for these present-day warning signs that you might not be on track to stay solvent in your golden years. 

You Still Have Unsecured Debts

Ideally, you want to retire entirely debt-free. 

It’s not necessarily the end of the world if you haven’t paid off your mortgage balance before retiring. But unsecured debts, like credit card balances, personal loans and even student loans, spell trouble. 

These debts typically come with far higher interest rates than secured debts, like home mortgages and auto loans. In fact, LendingTree reported that the average credit card interest rate is a dizzying 24.43%. 

Compare that with the 5% to 10% returns you might earn on your retirement investments, and you see the problem. 

You Can’t Stick To a Budget

Some people just plain struggle with sticking to a budget. Money burns a hole in their pocket. Even worse, so does plastic, and they find themselves racking up more debt than they can pay off each month. 

As much trouble as that can get consumers into while working, it gets exponentially worse in retirement. They can’t as easily earn their way out of the problem by working more hours. 

If you often find yourself spending more in a month than you bring in, find a way to stick to a budget before you retire. Try the envelope system, or use a combination of cash and debit cards only. Lock your credit cards away in a drawer somewhere until you’ve paid off all balances and lived within your means for at least a year. 

Whatever you do, don’t retire before you know how to live on a budget. 

You Haven’t Budgeted for Health-Related Costs

Sure, Medicare will help cover many of your health expenses in retirement, but not all of them. 

A 2024 study by T. Rowe Price found that a 65-year-old married couple retiring today can expect up to $351,000 in medical costs over their retirement. In addition to doctor’s bills, you could pay for out-of-pocket for prescription drugs, long-term care, assisted living and Medicare gap coverage in retirement. 

Have you budgeted for health costs in retirement? If not, start adding that as a line item for your retirement budget and estimating realistic costs. 

You Still Pay for Dependents

If you subsidize your grown children in any way, consider it a red flag for retirement. 

Adult children can quickly become a black hole in your budget. This month, they come to you for help fixing their car. Next month, it’s their insurance premium that they can’t quite cover. The next month, it’ll be something else. 

Until they need to swim on their own, they’ll keep tugging at your lifeline.

You Aren’t on Track To Retire With 25 Times Your Budget

If you plan to follow the classic 4% rule — withdrawing 4% of your nest egg in the first year of retirement, then adjusting upward each year for inflation — then you’ll likely need 25 times your annual spending as a nest egg. 

Note that means 25 times your post-retirement spending, not necessarily your current spending. Some people spend less in retirement than in their working years; others spend more, especially in the first few heady years of travel and adventure. 

Speak with a financial advisor about the 4% rule and come up with a personalized plan for your own retirement. Still, saving 25 times your planned annual spending remains a solid back-of-the-napkin goal for retirement savings. 

You Rely On a Single Income Source

Paying for retirement should involve combining many sources of income and savings. 

These could include Social Security benefits, a 401(k) or similar workplace retirement account, IRA investments, real estate investments, annuities, a pension, and taxable brokerage accounts. But if you find yourself dismissing the entire problem of retirement and assuming a single source — such as a pension or Social Security — will take care of it for you, you could be in for a shock. 

A senior fellow at the Stanford Institute for Economic Policy Research, for example, estimated that unfunded pension obligations are around $5.1 trillion.

Don’t gamble with your retirement. You can’t necessarily just go back to work if you discover halfway through retirement that you need more money. You need to get it right the first time, and that requires planning decades in advance and managing your retirement funds well once you do exit the workforce. 

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