Make your savings last

Key Points

  • Determining a realistic retirement withdrawal rate is critical.
  • Health care can be one of the largest expenses for retirees; be sure to plan for it.
  • Have an emergency fund that covers at least six months of expenses.

You've worked hard and saved for the future — now you need to make sure your savings last the rest of your life. By understanding the risks you face, you can make smart choices about how much to withdraw and how to handle unexpected financial challenges.

The financial implications of a long life

According to the National Center for Health Statistics, people today can expect to live more than 30 years longer than they did a century ago. Individuals who reached age 65 in 1950 could expect to live an average of 14 years more, to age 79; now a 65-year-old might expect to live for roughly an additional 19 years.1

A long life can be a wonderful thing. But it does add a challenge to retirement planning prompting you to ask yourself: how long will my savings last? 

Here are some strategies to consider that may help your savings last longer for you.

Ways to save for retirement

Determine a sustainable retirement withdrawal rate

A smart, conservative withdrawal plan can help. Working with a financial advisor to decide how much to withdraw, which accounts to take the money from, and when to do so can help secure a comfortable retirement for you and your spouse or partner, and help ensure your retirement income lasts as long as possible.

How much can you afford to withdraw from your savings each year will depend on your individual needs. Many retirees have an unrealistic idea of the amounts they can withdraw annually without running out of money. Aggressive withdrawals are generally unsustainable — especially when the markets are down.

Plan for health care expenses

The cost of health care in America is rising astronomically. Combined with longer lives and less insurance coverage, this presents a potentially huge expense for retirees. What can you do?

A good approach is to factor health care costs into your retirement expenses. The average couple age 65 with median prescription drug expenses needs to save $259,000 to have a 90% chance of having enough for health care expenses in retirement, according to the Employee Benefit Research Institute.2

By accounting for these expenses in your retirement plan, understanding your options for Medicare or other health care solutions, and/or securing long-term care insurance, you may be able to avoid tapping your other savings.

Prepare for the unexpected

While no one can predict the future, you can prepare by taking a few simple steps. For example, always keep enough cash to last six months easily accessible. With this cash reserve available, you may not have to deplete your main savings in the event of an emergency, or be required to liquidate longer-term investments.

Your Ameriprise financial advisor can help you develop a plan for making your savings last as long as possible, protecting your assets from health care expenses and preparing you for unexpected events with easily accessible savings accounts. To learn more, find an Ameriprise financial advisor in your area.