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How Long Will My Retirement Savings Last?

Retirement Planning
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senior couple at home reviewing finances and deciding how long their retirement savings will last

Life expectancies have definitely changed over the past decades. According to the Social Security Administration, a man who reaches age 65 today can expect to live, on average, another 19.3 years to age 84.3. Likewise, the average woman who turns age 65 today can expect to live another 21.7 years to age 86.7. In addition, approximately 25 percent of today's 65-year-olds will live past age 90, and about 10 percent will live past age 95. Curious about your own life expectancy? Use the Social Security Life Expectancy Calculator to get an idea of how long you may live, which may help you make more informed choices about your own retirement.

With these statistics in mind — and depending on your health and genetics — your retirement could last 30 years or more. A 2017 National Institute on Retirement Security report discovered that 76 percent of Americans are concerned about their ability to achieve a secure retirement. You may be wondering to yourself: How long will my retirement savings last? Although many retirees worry about the possibility of outliving their financial resources, there are some retirement strategies that can help you think about and plan more effectively for your future.

Helpful Retirement Strategies for You to Consider

If your retirement could last 30 years, what retirement approaches should you consider? First, let’s consider the length of time it takes to double your investment dollars.

The Rule of 72

Investing is all about long-term growth of your money, which is especially relevant when it comes to your retirement portfolio. The earlier you start saving for retirement, the more time your investment has to achieve growth potential. So how long does it take to double the value of an investment? The Rule of 72 is a quick and easy mathematical method to give you a rough estimate of the number of years needed to double the amount of your original investment.

According to the Rule of 72, you divide 72 by the annual rate of return to calculate the number of years it takes to double the value of your investment. For example, if you assume an annual rate of return of 8 percent, 72 divided by 8 equals 9 years. So $25,000 will grow to $50,000 at the end of 9 years. The following chart summarizes several different rates of return and their doubling rates, assuming an original investment of $25,000 starting at age 25.

The Rule of 72
72 / Rate of Return = Years Needed to Double Your Money

72 / 4 = 18
4% Return Doubles Every 18 Years

 Age Amount
 25 $25,000
43 $50,000
61 $100,000
79 $200,000


72 / 6 = 12

6% Return Doubles Every 12 Years

 Age Amount
 25 $25,000
37 $50,000
49 $100,000
61 $200,000
73 $400,000
85 $800,000


 72 / 8 = 9

8% Return Doubles Every 9 Years

Age Amount
 25 $25,000
34 $50,000
43 $100,000
52 $200,000
61 $400,000
70 $800,000
79 $1,600,000
88 $3,200,000


72 / 12 = 6

12% Return Doubles Every 6 Years

Age  Amount
25 $25,000
31 $50,000
37 $100,000
43 $200,000
49 $400,000
55 $800,000
61 $1,600,000
67 $3,200,000
73 $6,400,000
79  $12,800,000
85 $25,600,000


Keep in mind that the Rule of 72 is an approximation; it does not always provide the exact number of years required to double an investment. For example, for a 12 percent rate of return, the Rule of 72 gives you an estimate of 6.0 years. The actual number of years (based on more complicated algebraic equations to calculate real compounding) required to double your investment amount at a 12 percent rate of return is 6.12, which is longer than 6.0 years. According to Investopedia, with higher rates of return, the
Rule of 72 becomes less precise. Also keep in mind that investment value may fluctuate with changes in market conditions. Rates of return will change and are not guaranteed. When redeemed, shares may be worth more or less than their original cost.

Now that you know how long it takes to double your money, how do you figure out how long your savings will last?

The 4 Percent Rule

One way to help determine how long your savings might last throughout your retirement is to use the 4 percent rule. Financial advisor William Bengen developed the 4 percent rule in the 1990s as an ideal withdrawal rate after analyzing historical data on stock and bond returns between 1926 and 1976. Here's how it works: If you begin your first year of retirement by withdrawing 4 percent of your savings and making subsequent annual adjustments for inflation (and continue withdrawing 4 percent each year thereafter), your money should last approximately 30 years. You can use the 4 percent rule as a rough estimate to determine how much money you may need when you retire.

The 4 percent rule, however, has been challenged by many retirement planning experts because recent interest rates have been significantly lower than historical averages. Rates of return on portfolios heavily invested in bonds also have been lower, leading to a slower portfolio growth, which will lessen a portfolio’s value over time. Consequently, retirement funds may run out sooner than 30 years when applying the 4 percent rule when taking into consideration recent market trends.  

Given fluctuations in market returns, your retirement expenses and inflation over time, it may be helpful to consider dynamic withdrawals.

Dynamic Withdrawals

The dynamic withdrawal retirement strategy helps give you more flexibility than the 4 percent rule. It suggests you change your withdrawal amount each year, depending on the performance of your investment returns and your actual expenses. When your investment dividends are higher, you have the freedom to withdraw more. You also may need to reduce your annual spending when your investment returns are less than you expected them to be.

The Bucket Approach

One final strategy to think about is the bucket approach, which separates your savings into three different buckets to help cover your immediate, short-term and long-term expenses. For example, your first bucket might contain six months of living expenses in an emergency savings account. Your second bucket could set aside three or four years' worth of living expenses, possibly split between a savings account and a bank certificate of deposit (to earn a little more over time). Your third bucket could contain longer-term investments. Over time you periodically move money from your long-term bucket into your short-term bucket. The goal of the bucket strategy is to help reduce your exposure to investment risk by giving you time to ride out fluctuations in the market over a few years. You may not have to cash in your investments when the market is down with access to the reserves you have in your short-term bucket.

Ways to Help Make Your Retirement Income Last Longer

Like the ocean tides, money generally flows in two directions: in as income and out as expenses. Here are two ways to help make your retirement savings last longer — by either reducing your retirement expenses or boosting your income during retirement.

The first way to help stretch your retirement savings is by tightening your budget. You may want to examine your monthly expenses and think about where you might be able to trim out some costs, like cable television or restaurant dining. Or you might decide to enjoy a staycation in your hometown rather than spending money on a flight to the beach.

Working a part-time job could increase your monthly income and help you preserve part of your retirement savings. You could find being a consultant in your previous profession a couple of days per week to be fun and energizing. Becoming more frugal with your budget and entertaining other sources of income may go a long way in helping increase the longevity of your retirement savings.

Remain Flexible & Make Adjustments Along the Way

Retirement planning is not "one size fits all" and should be customized to address your specific financial needs and goals — and personal wishes — over time. For instance, your retirement age is up to you. You may want to retire well before your full retirement age, or you may be interested in working into your 70s or beyond. Then again, you may change your mind completely once you actually reach your full retirement age because let's face it, a lot can happen between now and then.

Your retirement lifestyle is a major influencing factor as well. You may want to stay close to home during your retirement to spend more time with your family, or you might be more interested in traveling around the globe, which would require more financial resources. Lots of factors influence your retirement planning, which is best viewed as an evolving process over time.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.