‘You’ll Run Out of Money in 20 Years’ — Why Retirees Are Rethinking Their Savings Strategy
Written by
Laura Bogart
Edited by
Kristen Mae
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Though the common sentiment is that your youth is the best time of your life (which, if you had a typical high school experience, you know isn’t true), for many people, there’s a reason why they call retirement the “golden years.” You don’t have to clock into the office. You get those sweet senior discounts. You’ve got life wisdom. And if you’ve planned wisely, you’ve also built a solid retirement nest egg.
However, as economic circumstances shift around the world, retirees are starting to rethink some of the more traditional approaches to retirement savings. An amount of money that might have outlasted their parents’ or grandparents’ lifespans could run out for today’s retirees within 20 years.
To ensure their savings last, many savvy retirees are switching up the standard retirement game plan, recognizing that retirement planning today requires more adaptability than in previous generations.
They’re Worried About Outliving Their Savings
Generally speaking, people living longer is a good thing. However, greater longevity means retirees need larger savings to last through the rest of their lives. The World Economic Forum warns that as people live longer, retirees could outlive their savings by anywhere from eight to 20 years. The risk is real, even for healthy individuals, but it’s even more concerning for retirees who may face chronic health conditions and rising healthcare costs.
Recognizing this anxiety among retirees, especially people who are likely to live a longer-than-average lifespan, Morningstar conducted a 2024 study on the state of retirement income to offer updated savings recommendations. Their core advice hinges on retirees relying on multiple income streams and carefully timing withdrawals.
“Retirees seeking the highest level of lifetime income should consider a combination of delayed Social Security filing and a flexible withdrawal strategy such as the guardrails approach, according to our latest research,” Morningstar researchers wrote. “While cash flows from the guardrails strategy look volatile on a stand-alone basis, the addition of Social Security income adds valuable stability.”
They’re Realizing They Can’t ‘Set It and Forget It’
When it comes to retirement savings, one outdated strategy that Gregg Cummings, AIF®, CRPS®, CPFA®, founder and CEO of Gregg Cummings Financial, is glad to see retirees reassess is the rigid “set it and forget it” approach. This strategy entails withdrawing the same amount or percentage annually, without taking a clear look at their evolving needs or what’s happening in the market.
“More retirees are rethinking their ‘set it and forget it’ approach, and that’s a good thing. Longevity risk is real, and today’s retirement demands more flexibility than ever,” he said. “I encourage clients to use dynamic withdrawal strategies instead of sticking to fixed amounts or percentages. Retirees need to adjust based on market conditions and personal needs, not just pulling 4% every year no matter what.”
They Know They’ll Need To Diversify Income Sources
While many retirees have traditionally relied on bedrock retirement accounts like 401(k)s, IRAs and Social Security, some financial experts are concerned that these sources alone may not provide enough for a comfortable retirement — especially if they could be dealing with care needs down the line. To bridge the gap, retirees are exploring additional income streams, including part-time work, real estate investing and annuities.
The Morningstar report highlights annuities as a stable and consistent option for adding steady income without being subject to market volatility. Their advice for when to withdraw funds from that annuity? Wait as long as you can.
“In addition to considering delayed Social Security income, an allocation to a simple immediate or deferred annuity can also help enlarge in-retirement cash flows,” the researchers wrote. “But as with spending higher amounts from a portfolio to enable delayed Social Security filing, the allocation to the annuity early in retirement reduces the money in the portfolio that can compound over the retiree’s drawdown period.”
Part of enjoying a long and pleasurable life involves being willing to adapt as your needs evolve — and embracing a more flexible approach to your retirement savings can be a great place to start.
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub — and you’ll be entered for a chance to win $500.
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