14 Key Signs You Will Run Out of Money in Retirement

Cameron Huddleston  Tue, July 11, 2023

You don't want to go broke in retirement. Despite all your preparation, however, you might discover that your retirement is going to cost more than you planned.

First and foremost, you need to become aware of the reasons that the budget you have in mind could be smaller than it needs to be. If you're worried about having enough money, check out the signs that you might not be saving enough for retirement.

You Don't Have a Long-Term Care Plan

You could quickly run out of money in retirement if you need long-term care but didn't have a plan to pay for it. More than half of adults turning 65 today will need long-term care and about 1 in 7 will need care for more than five years, according to the Department of Health and Human Services.

If you receive care in an assisted living facility or nursing home, you'll have to shell out big bucks. The average annual cost of care in an assisted living facility was $54,000 in 2021, according to the Genworth Cost of Care Survey.

"Even the wealthiest people are at risk if they have a lot of long-term care expenses," said Dave Littell, professor emeritus of taxation at The American College.

What To Do

You can use several strategies to be financially prepared for long-term care, Littell said. Options include getting a long-term-care insurance policy or hybrid life insurance policy that will pay out if you have a long-term-care event. Another option is a longevity annuity, Littell said.

This is an insurance product that requires a lump-sum investment and will provide a steady stream of retirement income. But, you have to wait several years or until a certain age to start receiving your payout. As a result, "you can't time it exactly with a long-term care need," Littell said. Ideally, you should meet with a financial planner who specializes in long-term care planning to help you devise a strategy, he said.

You Underestimated Your Life Expectancy

Your retirement could easily be more expensive than you thought if you live a lot longer than you expected you would. About 1 in 3 65-year-olds today will live to age 90, according to the Social Security Administration.

If you saved enough to cover expenses for 20 years in retirement but end up living for 30 years in retirement, you'll have to find a way to stretch your savings for another 10 years.

What To Do

Littell recommended using the life expectancy calculator at Livingto100.com to get an estimate of how long you will live based on your health and family history. To reduce the risk of outliving your savings, you shouldn't rely on just one source of income in retirement.

You should also have a portfolio of diversified investments in a retirement account from which you can withdraw money over time. Additionally, you should take a balanced approach by having a source of lifetime income such as an annuity if you won't have a pension, Littell recommended. Limit withdrawals to about 4% annually to ensure your nest egg lasts long enough.

You Didn't Plan for High Healthcare Costs

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