Five ways to help your retirement savings last

Morgan Stanley Wealth Management


Summary: If your retirement lasts longer than you expect, will you be ready? Here’s how to make your money last.


Elderly couple riding their bicycles.

Most people look forward to retirement and the prospect of new hobbies, travel, and quality time with family and friends. Improvements in medical care have increased the length of time that retirees may have to enjoy these years. However, with longer retirements comes a new challenge: Will your retirement savings last?

You might be surprised how long you need to plan for. In 1970, the average retirement lasted between 12 and 16 years. Now it’s common for retirements to span 20 years or more1–and that number may continue to increase in light of potential future medical advances. Current data suggests more than a third of 65-year-olds will live to age 90, and the likelihood that at least one member of a couple will live to that age is nearly one in two.2 And higher income and education levels tend to increase the likelihood of longer lifespans even more.

Fortunately, there are a variety of strategies you can use to help you reduce longevity risk in retirement savings. Here are five to consider:

1. Maximize your retirement savings

If you’re saving for retirement, consider the following:

  • Contribute the maximum annual contribution amount to your workplace retirement plan and/or individual retirement account (IRA);
  • Contribute to a taxable brokerage account to supplement your retirement savings;
  • Evaluate insurance investment options like annuities and life insurance contracts as potential additional ways to build your retirement nest egg.

Certain types of investments, such as bonds or dividend-paying stocks, may also help you generate income for your spending needs in retirement without necessarily having to sell those securities.

2. Consider using the “income smoothing” strategy

A strategy known as “income smoothing” aims to help reduce your future tax liability once your required minimum distributions (RMDs) kick in. It involves taking distributions from certain tax-advantaged accounts in an effort to lower these accounts’ balances prior to you reaching RMD Age.* You can get started as early as age 59½. Why would you do that? Even though you’d have to pay taxes on the earlier withdrawals, this strategy may prevent you from being pushed into a higher tax bracket in any given tax year as a result of RMDs. 

3. Take into account possibly delaying Social Security

Social Security benefits can provide a significant boost to the sustainability of your retirement savings nest egg. Though you can begin collecting reduced Social Security benefits as early as age 62, you won’t be entitled to full benefits until you reach what the federal government considers “full retirement age,” which for most retirees is 66 or 67.

It often pays to defer Social Security to lock in a higher income stream, adjusted for inflation. In general, your Social Security benefit can increase by an additional 7.4% for each year you wait to claim it after your full retirement age, up to age 70. It’s estimated that deferral of Social Security benefits pays to the tune of over 3% per year more in cumulative benefits plus cost-of-living adjustments, which is a very attractive return.

4. Evaluate annuities

Annuities are a financial product that offer guaranteed payments for the rest of your life or for a set number of years, potentially reducing the risk that a longer life will jeopardize your comfortable retirement. There are different types of annuities to consider, including the following:

  • Variable annuities, for example, have a value based on the performance of a portfolio of professionally managed investments.
  • Fixed index annuities are benchmarked to the performance of an index, like the S&P 500, with minimum and maximum returns. These annuities offer contractually specified growth and payout rates.

5. Assess the potential of long-term care insurance

Long-term care insurance, including riders on life insurance and annuity products, may provide access to tax-efficient funds. This may enable flexibility and choice in paying for services required due to an extended care event. Funds may be used for nursing homes, health aides, or potentially care provided by family members. Such care can be very expensive without insurance. For example, in 2021, the national annual median cost of an in-home health aide was more than $61,000 and the median cost of a private room in a nursing home facility was more than $108,000.3 Complicating matters, such expenses typically arrive at the end of life, when you may have already spent much of your retirement savings nest egg.

The bottom line is that the prospect of planning for a longer retirement can be intimidating, but by using the strategies above you may be able to minimize the risk of outliving your assets.

The source of this article, How to Avoid Outliving Your Retirement Savings, was originally published on July 26, 2023. 

* The age at which an individual must start taking RMDs (“RMD Age”), depends on the year in which the individual was born (e.g., if born after 1950, but before 1960, RMD Age is 73).

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