Retirement Savings: How Long Your Money Will Last — and How to Stretch It

Figuring out how many years your retirement savings will last isn’t an exact science. There are many variables at play — investment returns, inflation, unforeseen expenses — and all of them can dramatically affect the longevity of your savings.

But there’s still value in coming up with an estimate. The simplest way to do this is to weigh your total savings, plus investment returns over time, against your annual expenses.

Try our calculator to get your estimate:

3 ways to make your savings last longer

A calculator like the one above can be a helpful guide. But it’s hardly the final word on how far your savings can stretch, particularly if you’re willing to adjust your spending to suit some common retirement withdrawal strategies.

Below are three smart rules of thumb on how to withdraw your retirement savings in a way that gives you the best chance of having your money last as long as you need it to, no matter what the world sends your way.

1. The 4% rule

The 4% rule is based on research by William Bengen, published in 1994, that found that if you invested at least 50% of your money in stocks and the rest in bonds, you’d have a strong likelihood of being able to withdraw an inflation-adjusted 4% of your nest egg every year for 30 years (and possibly longer, depending on your investment return over that time).

The approach is simple: You take out 4% out of your savings the first year, and each successive year you take out that same dollar amount plus an inflation adjustment.

Bengen tested his theory across some of the worst financial markets in U.S. history, including the Great Depression, and 4% was the safe withdrawal rate.

However, the volatile stock and bond markets in the post-pandemic world could be altering the fundamentals of this strategy. In 2022, both stocks and bonds fell dramatically while inflation ran hot. This created an environment in which the 4% rule may not have benefited investors as much as it did in the past, according to Morningstar's State of Retirement Income report ^[0]

2. Dynamic withdrawals

The 4% rule is relatively rigid. The amount you withdraw each year is adjusted by inflation and nothing else, so finance experts have come up with a few methods to increase your odds of success, especially if you’re looking for your money to last a lot longer than 30 years.

These methods are called “dynamic withdrawal strategies.” Generally, all that means is you adjust in response to investment returns, reducing withdrawals in years when investment returns aren’t as high as expected, and — oh, happy day — pulling more money out when market returns allow it.

There are many dynamic withdrawal strategies, with varying degrees of complexity. You might want help from a financial advisor to set one up. (Here’s how to find the best financial advisor for you.)

3. The income floor strategy

This strategy helps you preserve your savings for the long haul by making sure you don’t have to sell stocks when the market is down.

Here’s how it works: Figure out the total dollar amount you need for essential expenses, like housing and food, and make sure you’ve got those expenses covered by guaranteed income, such as Social Security, plus a bond ladder or an annuity.

A word about annuities: While some are overpriced and risky, using the right annuity can be an effective retirement-income tool — you fork over a lump sum in return for guaranteed payments for life. In the right circumstances, even a reverse mortgage might work to shore up your income floor.

That way, you always know your basics are covered. Then, let your invested savings be responsible for your discretionary expenses. For instance, you'd settle for a staycation when the stock market’s tanking. Which raises the question: Do you still call it a staycation when you’re retired?

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