Nearly 50% of Retirees Who Retire at 65 Could Run Out of Money: Here’s How To Avoid It

Are you hoping to retire by 65 but worry about running out of money? If so, you certainly aren't alone.

Almost half of workers who retire at 65 are likely to run out of money during retirement, according to financial services company Morningstar's Center for Retirement and Policy Studies.

Their model, which takes into account factors like changes in health, nursing home costs, and demographics, estimates that 45% of retirees could end up with depleted funds.

There is an increased risk for single women compared to single men and couples, and according to Morningstar, those most at risk are people who didn't save toward a retirement plan.

Luckily, if you're behind on your savings and unsure if your nest egg will be big enough to support decades of living without a paycheck, there are money moves you can make.
Here are things you can do now to set yourself up for retirement and avoid running out of money.

Find Out: 8 must-do things before 60 for a stress-free retirement

1. Meet with a financial advisor to double check your plan

Many people are not prepared for retirement. Half of Americans have not taken steps to determine how much money they need to save for their golden years, according to the U.S. Department of Labor.

To help discover how much you need and whether you’re truly on the right path, consider meeting with a financial advisor to see if you need to build your wealth further.

This type of professional can evaluate your current plan and suggest options for helping you reach important money goals.

Do you owe the IRS over $10K? Ask this company to help you eliminate your late tax debt.

2. Save more than you think you'll need

How much do you need to save for retirement? Whatever you think the number is, it can be wise to aim to save even more.

Many experts suggest that people will need 70% to 90% of their pre-retirement income to maintain their standard of living in retirement, according to the Department of Labor. However, the right number depends on your specific wants and needs.

So, what type of lifestyle do you want during retirement? If you are unsure — or even if you are not — saving more can provide a cushion that will reduce the risk of running out of money in retirement.

3. Note the expenses that likely will drop in retirement

For some people, expenses will drop in retirement. Will you pay off the mortgage before retiring? If so, that will leave more room in your budget.

Will you have adult children living at home, or will everyone have likely moved out? If it’s the latter, you might be able to downsize to a smaller home and save money.

Are you a homeowner? Discover 8 savvy money moves to stretch your budget

4. Bolster your retirement accounts

Contributing more to your retirement accounts might help increase your odds of building a nest egg that can carry you through retirement.

There are no guarantees, of course, but historically, saving and investing money has paid off for many people.

Also, the more you contribute to employer-sponsored or other tax-deferred accounts, the less you will owe to the IRS, at least in the short term.

5. Look into annuities

Annuities are one tool some people use to avoid running out of money during retirement.

With an annuity, you give up a lump sum of money or make a series of payments in exchange for a monthly payment from an annuity company for the rest of your life.

There are many different varieties of annuities, and this type of product has a lot of pros and cons. So, think carefully before purchasing an annuity.

6. Eliminate highly expensive debt before you retire

The longer debt sits around, the more expensive it gets. If you pay off debt quickly — ideally, prior to retirement — it not only saves you money in interest costs but also eventually frees up money in your budget.

If you’re struggling to get debt under control, consider working with an expert, such as a nonprofit debt counselor, to craft a debt management strategy. Many times, prioritizing debt elimination means more money in your pocket to put toward retirement.

7. Be sure you have a plan for health care costs

Medical costs can really damage a budget during retirement, and it’s no secret that as people age, their health often declines. So, make sure to prepare for these health care costs well before you stop working.

Although most people have Medicare in retirement, the program does not cover all medical costs. So, it can be helpful to tuck away a fair amount of money for health care needs.

Also, don’t forget to plan for the possibility of long-term care. Medicare does not cover the cost of long-term care.

8. Put good spending habits in place now

Even if you are decades away from retirement, the sooner you create solid spending habits, the better off you will likely be in the future.

This might include crafting a budget and sticking to it. Budgets shouldn’t feel limiting but rather supportive. An accurate budget helps you track expenses so you can stay on track with financial goals.

And remember, every time you purchase something you don’t really need, you have less money to devote to retirement savings.

9. Maintain a diversified portfolio

Many experts recommend creating a diversified portfolio of investments. Although there is no surefire strategy that is always guaranteed to work, diversification often can help reduce some of the risks of investing by limiting your losses.

We’ve all been told not to “keep your eggs in one basket,” and diversification helps prevent your investments from becoming too concentrated in one area.

Remember that you might have to adjust these strategies over time. Once again, a financial advisor can help you boost your retirement bank account.

Bottom line

Reducing costs and increasing savings strategies now might help you minimize the risk of running out of money in retirement.

Developing good financial habits can help boost your bank account so that you build a nest egg that has a better chance of carrying you through your golden years.

And if you need help, consider meeting with a financial advisor who can help you develop the right plan for saving and investing.

Money tips that can work for everyone

No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.

Focus on paying off your debt. Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.

Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.

Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).