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How Long Will My Retirement Money Last?

No matter how carefully you plan for retirement, you’re bound to wonder how long your money will actually last. Factors like where you want to live, healthcare costs, retirement savings balances, whether or not you work in retirement and more can affect this calculation. Additionally, you’ll also need to take inflation into account.  DIY retirement planning is difficult, so it might be worth consulting with a financial advisor in your area if you have questions about it.

How to Determine How Long Your Retirement Money Will Last

Figuring out how long your money is going to last in retirement is a pretty simple mathematical calculation. All you need to know how much money you have, how much money you expect to bring in during retirement and approximately how much money you spend each year. When the sum total of your years of spending outpaces your current savings and future income, that’s when you know you’ll be out of money.

One thing to think about when making this calculation is that the amount you’ll spend each year might change. For instance, if you’re currently living in a single-family home with your children, your rent or mortgage payment might go down if you decide to move to a smaller condo or apartment after you retire. You could also move to a less expensive part of the country, where housing, gas, food and other daily costs are lower.

On the other hand, some costs may get pricier as you get older. The obvious example is healthcare costs, as aging can inevitably bring health issues. If you’re approaching your 50s and you’re relatively healthy, your healthcare costs will likely be low. But no matter how well you take care of yourself, you’ll probably be spending more on healthcare in your senior years.

While these variables prevent you from making exact calculations, it’s important to take into account these spending changes when figuring out how long your money is likely to last. The other variable you won’t be able to predict is how long you’ll live — in other words, for how many years you’ll need to save. Ideally, you’ll have some buffer room in your retirement savings to account for this.

How Much Is in Your Retirement Accounts?

How Long Will My Retirement Money Last?

Once you’ve figured out how much money you’ll need year-by-year, you need estimate how much money you’ll have by the time you reach retirement. If you’ve been using a retirement account like a 401(k), that’s the first place you should look.

Obviously, you can just look at your account and see how much money you have in it. That is a good place to start. You’ll want to keep in mind, though, that the money in your 401(k) is accumulating interest. To get an accurate picture of how much money will be in your 401(k) account when you retire, you’ll need to keep in mind these capital gains. SmartAsset’s 401(k) calculator can do that for you.

Don’t forget to also take into account any other retirement accounts or products you own. This includes individual retirement accounts and annuities.

How Much Social Security Are You Receiving?

With all the focus on retirement savings, it can be easy to forget that you will also be receiving some money from the government once you’ve retired. You can expect to get a check every month that will supplement your bank account. While you probably don’t want to plan on living off of this, it will be part of the equation.

SmartAsset’s Social Security calculator can tell you what you can expect to make each year from Social Security, based on your age, annual income and expected age of retirement.

When You Want to Retire and Inflation

How Long Will My Retirement Money Last?

You should also have a rough idea as to when you want to retire. To help you figure this out, make sure to focus on things like when your pension plan will mature. Also, keep in mind any expenses that might make it necessary for you to continue working longer. This could include things like paying for children to go to college or paying off outstanding debts.

Once you’ve worked out when you plan to retire, you can begin to reliably calculate how long your money will last you and your spouse. However, don’t forget to take into account inflation and its various long-term effects. This is because inflation effectively shrinks your retirement savings without actually doing so.

Through inflation, prices rise naturally. But as these prices increase, your retirement funds stay at the same value. Therefore, the longer you wait to retire, the more expensive inflation will make things, which will in turn require you to spend more.

So let’s say you’re planning to spend $20,000 of your retirement money in 2020. Based on the results of SmartAsset’s inflation calculator, you can expect that number to jump to $20,500 in 2021, $21,013 in 2022, $21,538 in 2023, $22,076 in 2024 and so on.

Bottom Line

Knowing how long your money will last in retirement is an important part of planning for your golden years. You’ll want to know about how much you spend each year and what age you plan to retire in order to really get an accurate representation of your financial situation. Be sure that you also have an idea as to what you’re in line to receive from Social Security.

Don’t feel like you have to approach planning for your retirement on your own. Financial advisors often focus on specific areas of finance, and retirement planning is one of the most common specialties. Therefore, a financial advisor could be a great ally for you and your spouse.

Retirement Tips

  • Building your retirement savings is much easier said than done. However, the process of financially preparing for retirement is a long-term game. In turn, you just want to make sure that you’re roughly on track with where you should be for your age. Check out SmartAsset’s guide to average retirement savings by age to figure that out.
  • If you need help figuring out how long your money will last in retirement, or you want to work on saving more, a financial advisor could be a worthwhile investment. SmartAsset’s free advisor matching tool can make your search for a suitable, local advisor much easier. Get started now.
  • When planning for your retirement, make sure to remember that some life events could derail your inital retirement plans. For instance, your kids could move back home or your spouse could require long-term care services.

Photo credit: ©iStock.com/MarioGuti, ©iStock.com/AleksandarNakic, ©iStock.com/designer491

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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