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If you are worried about running out of money in retirement, you are not alone. Running out of money is the main concern of most people in or approaching retirement.And, there is VERY good reason to be concerned — VERY concerned.
Most of us do not have enough money for retirement.
According to a detailed report by the Employee Benefit Research Institute (EBRI), many of us are in fact very likely to run out of money.
- 83 percent of baby boomers in the lowest income quartile will run out of money in retirement
- 47 percent of boomers in the second lowest quartile will run out
- 28 percent of boomers in the second highest quartile will run out
- 13 percent of boomers in the highest income quartile will run out
Yikes!
The above data refers to people who will be retired for 35 years. The data is only slightly better if you are living in retirement for 20 years — but even then a full 81 percent of the lowest income quartile and 8 percent in the highest income quartile will run out of money.
Yikes! Yikes! YIKES!
So, What Happens When You Run Out of Money in Retirement?
Running out of money in retirement — in these scenarios — does not mean that you are completely penniless.
Running out of money in retirement usually means that you have used up all of your retirement savings and your home equity and are left with whatever income streams you might have — Social Security or a pension if you are lucky.
Most people who run out of money in retirement continue to scrimp by — living on Social Security income and they have probably opted into Medicaid instead of Medicare.
You are likely no longer in your own home and have opted into low income programs and/or are relying on family for shelter or support.
Running out of money in retirement usually means that you are living in poverty or at a very low income level.
How Much Do I Need to Retire? How to Avoid Running Out of Money in Retirement
The best way to avoid running out of money in retirement is to have a very good retirement plan — totally generated for you and your needs.
You will want a calculator that can help you find out: how much do I need to retire? how much income will I have in retirement? Will my income cover my retirement expenses?
The NewRetirement Retirement Calculator is one of the best retirement calculators. It answers all of these questions and lets you try out different scenarios so you can immediately find out what happens if you save $100 more each month or spend less or do something big like downsize your home.
Depending on your goals and values, a really good retirement plan might involve the following:
- Saving more now than you already do
- Spending less now or in the future
- Adding insurance products or ways to cover medical and long term care expenses
- Considering the purchase of a lifetime annuity to insure lifetime income
- Working longer than the traditional retirement age or working as long as possible
- Delaying the start of Social Security which maximizes your guaranteed retirement income
- Tapping into your home equity at the optimal time by downsizing or taking a reverse mortgage
- Getting rid of high interest debt
- Optimizing your investment strategies
A retirement calculator can help you create a personalized retirement plan. To find out which of these strategies would work for you and to get an estimate of if you will run out of money in retirement, use the NewRetirement Retirement Calculator.
Find out how much you should save for retirement
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