5 Tips for Making Your Money Last in Retirement

senior man and woman talking to a financial advisor about money in retirement

Retirement is a time to enjoy the fruits of your labor and spend more time with family, friends, and your biggest passions and interests.  


But it’s also a period that requires careful financial management.


In fact, making your money last is one of the biggest fears of retirement.


If questions like: “How to make retirement money last?” or  “Will I outlive my retirement savings?” plague you, we bring you five tips for making your money last in retirement.


#1 Calculate Your Retirement Budget (and Stick to it)

The average American spends over $65,000 per year. And that number doesn’t change too drastically once you reach retirement:


how spending changes before and after retirement


Living on a fixed income can be challenging at times, but living with the concern of running out of money before you run out of time can be terrifying. To make your money last in retirement, start by creating a monthly budget.


The first step in creating a monthly budget is determining your retirement income amount that you can expect to hit your account each month. Then list all of your fixed expenses, such as your mortgage, car payment, insurance premiums, utilities, estimated food costs, etc. … 


Now subtract those from your income figure to see what amount of money remains each month for variable expenses such as clothing, gas, or health care expenses. 


And finally, if you really want to save money in retirement,  avoid unnecessary spending and save where you can (refer to this senior discounts list for the best savings out there). Cut out all non-essential costs. If you’re curious about unnecessary spending, check out your expenses from the last several months and jot them down in a categorized list.


Of course, it’s wise to always have some cash on the side for a rainy day or emergency. A recent survey found that a quarter of Americans have no emergency fund at all. If you’re not setting aside money for emergencies in retirement, it’s time to take a closer look at your monthly budget. 


Something as simple as clarifying where the money is coming and going can make all the difference. Check out this article for extra help with budgeting in your day-to-day.


#2 Consider Downsizing

It’s no surprise that many retirees decide to sell their homes and relocate in retirement, especially when you consider the fact that you can save about $1,604 every month by downsizing


While the process can seem overwhelming, it doesn’t have to be if you take the time to weigh the advantages and disadvantages. 


Some advantages to downsizing include more cash flow, lower mortgage payment, and lower utility bills. On the other hand, you’ll need a plan in place and some money saved up for the inevitable costs, like property taxes, moving costs, and any real estate fees.


the advantages and disadvantages of downsizing in retirement to making your money last


Put everything on paper and calculate how much you could be saving. And remember that most of the costs associated with downsizing are one-off.


Keep in mind, though, the biggest downside might be trying to find a new place you love and want to call home. Moving might not seem like an attractive idea because of the unknown of moving to an unfamiliar place. 


But if you find clarity on your biggest retirement goals and priorities first, it could make all the difference – where you’re living a vibrant fulfilling retirement and setting yourself up to successfully age in place


It’s worth considering your downsizing options, no? Learn more about the factors you should consider when moving in retirement.


#3 Consult With a Financial Advisor 

Many people are unsure of what to do with their financial investments in retirement, but consulting with a financial advisor can help to determine ways to achieve your financial retirement goals and needs. 


Not only will it give you peace of mind in knowing that you won’t outlive your money, but the value of a financial consultant’s advice can provide an average 3% net return yearly.

financial advisors can be worth it because the value of a financial consultant's advice can boost net returns by 3% every year


Not that any portfolio performance is ever guaranteed. But you can at least match your individual risk tolerance to your portfolio asset allocation.


There are many different aspects that go into retirement planning — from deciding when to retire and knowing exactly where your retirement income will come from, to understanding your tax expenses and the best ways to minimize your taxes.


Not to mention, there’s an advantageous (and disadvantageous) strategy for timing everything the right way (and we’re not talking about timing the market – never time the market). 


For instance, knowing when the best time to withdraw social security, and when to pull from taxable vs. tax-deferred vs. tax-free buckets can significantly mitigate your financial risks. 


It can seem overwhelming when you’re faced with managing retirement finances on your own, but there’s an abundance of financial advisors out there who specialize in helping older adults manage their portfolios and run scenarios for each specific situation.


Just be sure to choose a financial advisor that you can trust. 


Not sure who to trust? Look for a fiduciary CFP.


Among the various types of financial advisors, we recommend choosing a fiduciary Certified Financial Planner (CFP), which means they’re highly trained and obligated to act in your best interest and paid by you directly rather than incentivized by product commissions. 


#4 Plan for Healthcare Costs 

The jury is still out on whether retirement is good or bad for your health. Which makes sense when you think about the wide range of lifestyles people choose to live. 


But, one thing is common across the board — rising healthcare costs. By 2028, US healthcare spending will reach $6.2 trillion and account for almost 20% of the GDP. This is no surprise since the costs are currently growing 1.1% faster than the annual GDP is.


scary statistics of rising healthcare costs in the US


These costs are only expected to keep increasing because of healthcare spending factors like the growing population, aging older adults, and service price and intensity. 


If you’re wondering about where the money goes, here’s a breakdown of the top 10 healthcare spending categories, with hospital care leading the way consuming 31% of the costs.


top 10 healthcare spending categories in the us


With the rising costs of healthcare and the inevitable health decline as you go super deep into the aging process, taking health costs into account when planning retirement finances is essential.


Healthcare utilization tends to increase as you age, so keep an eye on rising costs while also taking some proactive steps today to improve your health in retirement.

#5 Find Ways to Supplement Your Income

If you don’t have enough money saved up for retirement, feeling accomplished or even enjoying your retirement can be a very difficult task. The good news is that there are ways to supplement your income in order to make sure that you’re able to retire comfortably – even on a small budget.


Take a look at these 14 ways to improve your finances in retirement. If these are not enough, you might have to consider working after retirement. Here’s how to find a job and a list of 9 best part-time jobs to inspire you in your job hunting. Or these 9 retirement hobbies that can supplement your income.


Just be sure that you know the rules to working after retirement to maximize your earnings.


Fund Your Retirement With More Ease

Achieving your retirement financial goals is not about luck or chance (just like it isn’t with any goal setting). 


It’s a matter of understanding how much money you need and planning ahead — and, if needed, adjusting your income and spending habits accordingly.


What are some things that helped you save for retirement? Be sure to share them with us so we can all learn from each other.

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