How Long Your Money Can Last in Retirement
Written by: Jacob S.
Published on:
It’s one of the most important, and sometimes nerve-wracking, questions in personal finance: how long will my retirement savings actually last? Most people think about retirement in terms of a dollar amount, the balance in a 401(k), IRA, or savings account, but the real challenge is figuring out how far that money can stretch once paychecks stop.
The answer isn’t the same for everyone. It depends on how much you withdraw, what your investments earn, how long you’ll need the money, and how inflation and taxes play into the equation. While online calculators can be helpful, understanding the logic behind the numbers gives you more control.
Key Takeaways
- Your withdrawal rate determines your timeline. The percentage you withdraw each year—often around 3–4%—is one of the strongest predictors of how long your savings will last.
- Inflation and taxes quietly reduce longevity. Rising prices and after-tax returns can shrink your portfolio faster than you expect if you don’t adjust annually.
- Other income sources matter. Social Security, pensions, or part-time income can dramatically extend your retirement savings by reducing how much you need to withdraw.
- You can adjust the levers. Spending less, earning slightly higher returns, or delaying retirement can each add years of financial stability to your plan.
Step 1: Start With What You Have
Begin with your current retirement savings, everything you’ve put away for later life. That includes any liquid assets, 401(k)s, IRAs, pensions, brokerage accounts, and even cash savings earmarked for retirement.
This total is your starting balance, the “nest egg” you’ll rely on once you stop working. For example, let’s say you’ve built up $500,000. That’s your foundation. The next question is how much you’ll need to draw from it each year.
Step 2: Estimate Your Annual Withdrawals
Your withdrawal rate is the amount you plan to withdraw annually to cover living expenses; things like housing, groceries, insurance, travel, and hobbies. If you plan to withdraw $50,000 per year from that $500,000 balance and your money doesn’t grow at all, your savings would last about 10 years ($500,000 ÷ $50,000 = 10). Of course, real life isn’t that simple. Investments usually earn returns, and costs rise over time, so let’s layer in those effects.
Know how much you have: Create a zero-based budget
Step 3: Add Investment Growth
Your investments likely continue to earn something even after you retire. If your portfolio grows at an average rate of 4% per year (after fees and taxes), you can withdraw a similar percentage annually and, theoretically, keep your balance steady.
That’s where the well-known “4% rule” comes from: if you withdraw about 4% of your savings each year, adjusted for inflation, there’s a good chance your money could last 25 years or more. But it’s not a guarantee, returns vary, and markets don’t move in straight lines. If you want to be conservative, you might plan for a lower return or a smaller withdrawal percentage, like 3%–3.5%, to reduce the risk of running short later.
Step 4: Factor In Inflation
Inflation gradually erodes your purchasing power over time. The $50,000 that covers your expenses today might require $51,500 next year if prices rise by 3%. That means you’ll need to increase withdrawals each year just to maintain the same lifestyle, which shortens how long your savings can last. A good approach is to plan with realistic inflation assumptions (2–4%) and review your spending yearly to see how costs are shifting, especially for essentials like healthcare.
Step 5: Include Other Income Sources
Your retirement income may come from more than just savings. Social Security, pensions, rental income, or part-time work can all reduce the amount you need to withdraw from your portfolio.
For instance, if Social Security covers $20,000 of your annual expenses and your total spending is $50,000, you only need $30,000 from savings, a major difference that could add years to the lifespan of your nest egg. Think of it this way: every dollar of guaranteed income is a dollar your savings doesn’t have to produce.
Step 6: Don’t Forget Taxes and Fees
Withdrawals from traditional IRAs and 401(k)s are typically taxable. Investment fees also eat into returns. These costs might lower your effective return from, say, 5% to closer to 3.5%. To be safe, plan using after-tax and after-fee numbers, the money you actually get to keep. This gives a clearer picture of how long your savings might truly last.
Related: Understand the difference between gross income and net income
Step 7: Estimate Your Retirement Horizon
How long do you need your savings to last? Many planners recommend assuming a 25–30 year retirement period, especially if you retire in your 60s. With longer life expectancies, some people will need their savings to stretch even further. Since no one knows exactly how long they’ll live, it’s smart to plan for a longer horizon than you think you’ll need. Running out of money at 85 is a much bigger problem than having a little extra left over.
Step 8: Adjust the Levers
The beauty of this “text-based” method is that you can see how small adjustments make a big difference.
Reduce spending: Cutting 10% from your annual withdrawals could add several years to your savings lifespan.
Delay retirement: Working a few more years means more contributions and fewer years of withdrawals.
Earn slightly more: Even a 1% increase in annual returns can extend savings by many years.
Add side income: Freelance or part-time work can help preserve your nest egg while keeping you engaged. In other words, you have more control than you think.
Step 9: Review and Revisit
Retirement planning isn’t “set it and forget it.” Your expenses, returns, and goals will change. Revisit your plan every year or two—especially after major life events, market changes, or health shifts. If you find that your withdrawal rate is creeping up, consider tightening spending or revising your portfolio strategy. Flexibility is the key to longevity.
There’s no single number that guarantees your savings will last a lifetime. But by understanding the moving parts—your starting balance, withdrawal rate, returns, inflation, other income, and life expectancy—you can estimate how long your nest egg may go the distance. Think of this as financial navigation, not prediction. The more you understand the route, the better you can steer when conditions change. And if you’re still building your retirement savings or recovering from financial setbacks, remember: it’s never too late to plan. Even small, steady steps—budgeting smarter, managing debt, or exploring supplemental income—can make your future more secure.
