4 Signs You’re at Risk of Outliving Your Retirement Savings
Written by
Vance Cariaga
Edited by
Daria Uhlig
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One of the biggest financial worries for Americans is running out of money in retirement. In fact, that was the No. 1 fear cited in a 2023 GOBankingRates survey, named by about two-thirds of respondents. The fear is not unfounded, considering that nearly half (47%) of Americans ages 55 to 64 don’t think their retirement savings are on track, while 39% of those 65 to 74 said the same thing.
The reasons you might outlive your retirement savings are many and varied. One is adopting a “Live Well Die Broke” philosophy, according to a YouTube video from Tony Walker Financial. This essentially means you spend money on getting the most out of life without worrying about leaving any money behind — which works great until you realize that you underestimated your life expectancy.
For most people, the risk of running out of money has to do with inadequate retirement savings, higher-than-expected expenses or some combination of the two.
Here are four signs you might be at risk of outliving your retirement savings.
Chronic Overspending
This is the term RBC Wealth Management used to describe seniors who spend more than they can afford on purchases such as multiple homes or big-ticket items for their adult children or grandchildren. The biggest warning sign is that you are spending more than your budget allows, which means you are tapping into your retirement accounts faster than you should. Overspending partly explains why one-third of wealthy Americans think it’s possible they could outlive their savings.
Debt Is Piling Up
The last thing you want to do in retirement is take on more debt. What you should be doing instead is paying off debts, including your mortgage, car loans, personal loans, student loans and credit cards, and getting them off the books completely. As SmartAsset noted, it’s a “huge red flag” if your debts start rising in retirement — especially when it comes to credit card debt.
Your Budget Doesn’t Cover Enough Years
Suppose you planned to live another 20 years in retirement but were told by your doctor that you are in good enough health to make it at least another 25 years. On the one hand, congratulations — you’re in great shape! On the other hand, the budget you so painstakingly put together won’t cover enough years. If this is the case, you have two basic choices: figure out a way to stretch your dollars for longer, or bring in more income through side gigs, investments or some other means.
Your Healthcare Costs Are Rising
Another common mistake seniors make is underestimating their healthcare costs. As previously reported by GOBankingRates, basic healthcare costs in retirement are currently more than $250,000, according to Brandon Hayes, a managing director and private CFO at oXYGen Financial in Atlanta. Separate research from T. Rowe Price estimated that a 65-year-old couple retiring in 2024 would need $315,000 or more to cover medical expenses in retirement. When you find that your healthcare costs are rising faster than you expected, that’s a warning sign that you will outlive your retirement savings.
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