How Long Will My Money Last in Retirement? The Factors That Matter Most
"How long will my money last in retirement?" is one of the most common questions people ask as work winds down. It is also one of the hardest to answer with a single number, because the result depends on how much you spend, how your money is invested, how long you live, and how much of each withdrawal goes to taxes.
The good news is that each of those factors can be examined and planned for. This guide walks through what drives the answer, how a retirement calculator can help, and why investment planning and tax planning should be reviewed together.
Start Here: A Complimentary Retirement Wealth and Tax Review
Before relying on any single projection, it helps to see your whole picture in one place. Compound offers a complimentary, no-obligation wealth and tax review that may include:
Your retirement accounts: 401(k)s, IRAs, Roth accounts, and taxable investments
Expected income: Social Security, pensions, rental income, or business income
Spending: essential expenses versus flexible spending
Taxes: how withdrawals from different accounts may be taxed over time
Request your complimentary review.
How Long Will My Retirement Savings Last? Six Factors
1. How much you withdraw each year
Your withdrawal rate, the share of your portfolio you take out each year, is the single biggest lever. Higher withdrawals shorten the runway, especially early in retirement. Many retirees find it useful to separate essential spending from discretionary spending, since discretionary items can often flex in difficult markets.
2. How long retirement lasts
Many people underestimate how long they may live. A retirement that begins in your early 60s may last 30 years or more, and for married couples, planning often considers the possibility that one spouse lives well into their 90s.
3. Investment returns and their order
Average returns matter, but so does timing. Poor returns in the first few years of retirement, while withdrawals are also being taken, can have a larger effect than the same returns later on. This is often called sequence of returns risk. A portfolio built around your spending needs, with a plan for where withdrawals come from in a down year, may help manage it.
4. Inflation
Rising prices reduce what each dollar buys. Even modest inflation over a 25 or 30 year retirement can significantly increase the cost of the same lifestyle, which is one reason many retirement portfolios keep some exposure to growth investments.
5. Health care costs
Medicare does not cover everything. Premiums, out-of-pocket costs, and potential long-term care needs can be among the largest and least predictable retirement expenses.
6. Taxes on withdrawals
A dollar in a traditional IRA is not the same as a dollar in a Roth IRA or a taxable brokerage account. Withdrawals from tax-deferred accounts are generally taxed as ordinary income, while qualified Roth withdrawals are generally tax-free. If you need a certain amount to spend, you may need to withdraw more from a pre-tax account to cover the tax. That is why the same portfolio balance can support different amounts of spending depending on how it is divided across account types.
Using a Retirement Savings Calculator
A retirement savings calculator can be a helpful starting point. Most ask for your current savings, contributions, expected return, retirement age, and spending, then project whether your money may last. When people search for the best retirement calculator, they are often looking for one that includes inflation, taxes, and Social Security, since those inputs can change the answer considerably.
Keep in mind what calculators typically cannot do:
They often assume a steady return each year, which real markets do not deliver
They may not reflect how different account types are taxed
They usually do not adjust spending if markets fall
They cannot account for your full situation, such as a business sale, real estate, or an inheritance
To explore how a hypothetical investment may grow under different assumptions, including the effect of taxes, try the Compound calculator. Results are hypothetical, but they can help frame a more detailed conversation.
Ways to Help Your Money Last Longer
Every situation is different, but these are areas often worth discussing with your advisors:
A spending plan with flexibility. Building in room to reduce discretionary spending after weak market years.
Social Security timing. Delaying benefits generally increases the monthly amount, which may reduce pressure on the portfolio later.
Withdrawal sequencing. Choosing which accounts to draw from, and when, with the goal of managing lifetime taxes rather than just this year's bill.
Roth conversions. Converting some pre-tax savings in lower-income years may reduce future required distributions. Learn more about how to evaluate a convert pretax to Roth strategy.
A cash reserve. Holding a reasonable amount in cash or short-term holdings so you are not forced to sell investments during a downturn.
Regular reviews. Revisiting the plan each year as markets, tax laws, and your needs change.
Why Investment and Tax Planning Should Work Together
How long your money lasts is both an investment question and a tax question. A portfolio may be well diversified, but if withdrawals are not coordinated with your tax picture, more of each dollar may go to taxes than necessary. When wealth management and tax planning and preparation happen together, decisions about withdrawals, conversions, and investments can be reviewed side by side.
Compound works with retirees and pre-retirees throughout Wisconsin, including Milwaukee, Madison, Green Bay, Appleton, Oshkosh, Janesville, and La Crosse, as well as surrounding areas. For more on what to consider locally, read about retirement planning in Wisconsin and how to find a financial advisor for retirees in Wisconsin. You can also see what a comprehensive financial plan may include.
Want a clearer answer than a calculator can give? Request a complimentary wealth and tax review.
Frequently Asked Questions
How long will my money last in retirement?
It depends on your withdrawal rate, investment returns, inflation, taxes, health care costs, and how long you live. A plan that models several scenarios can give a more realistic range than a single estimate.
What is the best retirement calculator?
There is no single best option for everyone. Look for a retirement calculator that includes inflation, taxes, Social Security, and varying returns, and treat the result as a hypothetical starting point rather than a forecast.
Does it matter which accounts I withdraw from first?
Yes. Traditional, Roth, and taxable accounts are taxed differently, so the order of withdrawals can affect how much you pay in taxes over your lifetime and how long your savings may last.
What is sequence of returns risk?
It is the risk that poor investment returns early in retirement, combined with withdrawals, reduce a portfolio more than the same returns would later on.
How often should I update my retirement plan?
Many retirees review their plan at least once a year, and again after major changes such as a market decline, a move, a health event, or a change in tax law.
Compound is a registered investment adviser. Registration does not imply a certain level of skill or training. This article is for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. Tax laws are complex and subject to change. Strategies discussed may not be suitable for everyone, and there is no guarantee that any strategy will achieve its objectives or reduce taxes. Calculator results are hypothetical, are not guarantees of future results, and do not reflect any actual investment. Investing involves risk, including possible loss of principal. Diversification does not ensure a profit or protect against loss. Please consult your tax, legal, and financial professionals before acting on any information in this article. For more information, see Compound's Form ADV, available at adviserinfo.sec.gov.
About Compound Wealth
Compound Wealth believes many financial decisions benefit from being evaluated together rather than independently. The firm integrates tax planning, wealth management, accounting, and business advisory services to help clients navigate financial complexity through a coordinated planning approach tailored to their evolving needs.
