For many American retirees, the scariest part of retirement isn’t boredom or even health problems, it’s the fear of running out of money. A new survey from Allianz found that 64% of Americans fear outliving their savings more than they fear death itself. And with rising costs, longer lifespans, and unpredictable markets, it’s a real concern for many.
The good news: even if you’re worried about running out of money in retirement, there are clear steps you can take to avoid financial trouble, and real options to help if you’re already feeling the strain.
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Why Running Out of Money in Retirement Is More Common Than You Think
Even with years of careful saving, many retirees still find themselves stretched thin. Here’s why:
Rising Costs and Inflation
Inflation quietly chips away at purchasing power year after year. What once seemed like plenty of savings may not go as far as expected when the cost of groceries, housing, and healthcare keeps rising.
Unexpected Healthcare Expenses
Medical bills and healthcare expenses can quickly become one of the biggest financial shocks in retirement, especially for long-term care, which isn’t always fully covered by Medicare. A single major illness or injury can derail even a well-planned retirement budget.
Living Longer Than Expected
While longer life expectancies are good news, they also mean retirement savings need to last longer. Many people underestimate how long they’ll live, and how much income they’ll need for those extra years.
Market Volatility and Investment Losses
Stock market fluctuations and investment downturns can significantly impact retirement accounts, especially if major losses happen early in retirement when you’re withdrawing funds.
Warning Signs You May Be Running Out of Money in Retirement
While some financial shocks happen suddenly, there are often warning signs that you may be on a risky financial path:
Your Savings Are Shrinking Too Fast
If you’re withdrawing more than your accounts are earning, your nest egg may start depleting faster than planned, especially when combined with inflation and rising costs.
You’re Relying on Credit Cards or Loans
Using credit cards or personal loans to cover living expenses is a major red flag. Debt adds interest payments that can quickly spiral, making it even harder to stay afloat.
Surprise Tax Bills Are Eating Into Your Income
Many retirees underestimate how taxes affect withdrawals from retirement accounts or property tax increases on their homes. These unexpected tax hits can throw off your income plan.
You Have Limited Income Streams
Relying on a single income source, like Social Security, puts more pressure on your savings. Without additional income streams, your risk of running out of money in retirement increases significantly.
How to Avoid Running Out of Money in Retirement
Even if you’re not in crisis, proactive planning can help you avoid running out of money in retirement:
1. Build a Realistic Budget
Take a detailed look at your current expenses and future needs. Don’t underestimate costs, especially for healthcare or lifestyle upgrades. A conservative, well-planned budget gives you a much clearer picture of how long your savings will last.
2. Diversify Income Sources
Relying on multiple income streams can help reduce financial strain. This might include:
- Dividends from investments
- Rental income
- Consulting or Part-time work from home
- Annuities or structured payouts
The more varied your income, the less you’ll depend on any single source.Â
If you are interested in more income sources, read our article about How To Make Money in Retirement, and we recommend this Forbes article for Financial Strategies in Retirement.
3. Prepare for Healthcare and Long-Term Care Costs
Health expenses often rise sharply with age. Long-term care insurance, dedicated savings, or planning for Medicaid eligibility can help protect against large medical bills down the road.
4. Reassess and Adjust Regularly
Your financial situation will likely change over time. Make it a habit to review your budget, income sources, and investments at least once a year, or whenever your circumstances change.
What to Do If You’re Already Running Out of Money in Retirement
If you’re seeing your savings dry up, you’re not alone, and you still have options.
Meet with a Financial Advisor
A financial advisor can help you identify possible sources of income or assistance you may not have considered, including strategies to reduce expenses or optimize withdrawals.
Explore Government Assistance Programs
You may qualify for benefits such as:
- Medicaid.
- Supplemental Security Income (SSI).
- Low-income senior housing or food assistance programs.
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While not ideal for everyone, these programs can offer temporary relief if you’re struggling financially.
Consider a Life Settlement to Unlock Hidden Cash
One often-overlooked option is selling an existing life insurance policy through a life settlement. If you no longer need the coverage or can’t afford the premiums, you may be able to sell your policy for a lump sum that can help cover living expenses, medical bills, or pay down debt.
Many retirees don’t realize that their life insurance policy is an asset that could provide immediate financial relief when it’s needed most.
Could Your Life Insurance Policy Help You Today?
At Harbor Life Settlements, we help retirees unlock the value hidden inside their life insurance policies. A life settlement can provide you with a lump-sum payment, often significantly more than surrendering the policy or letting it lapse.
Curious how much your policy might be worth? Use our free Life Settlement Calculator to get an instant estimate today.
You Still Have Options
Running out of money in retirement is a very real concern, but it’s not the end of the road. Whether you’re seeing warning signs or already feeling financial pressure, there are steps you can take to regain control.
From budgeting and diversifying income to exploring solutions like life settlements, you have more options than you might think, even if retirement hasn’t gone exactly as planned.
If you’re concerned about your retirement finances, Harbor Life Settlements is here to help.Â
Use our free estimator tool to find out how much your policy may be worth.
