How to make sure you don’t outgrow your retirement savings

With the future of Social Security feeling uncertain and the cost of living rising, many Americans worry that they will outlive their savings.

“Running out of money is a real risk, and for most retirees, it’s not because of bad investments,” said Melissa Caro, certified financial planner (CFP) and founder of My Retirement Network. “It happens because of bad timing, inflexible spending, or poor planning around income sources.”

Whether you’re already retired or looking to the future, here are five strategies you can use to ensure you don’t outgrow your savings in retirement.

Spend time planning

Planning is one of the most important steps to making sure you don’t run out of money in retirement. Don’t just pick the age you want to stop working out and assume things will work out.

“Make sure you have enough savings before “You’ve decided to retire,” said Michael Espinoza, CFP, of TrueNorth Retire. If you’re not sure how much you’ll need or what your savings will equal in annual spending, talk to a financial advisor.

“I like to use retirement planner calculations based on each individual’s desired spending amount to make sure they are saving and investing enough for retirement,” Espinoza said.

Think about the time horizon

The economy will fluctuate during your retirement and withdrawing from retirement accounts during market downturns can significantly reduce the value of your savings.

Caro recommends putting your money in different accounts during retirement based on how much you need it.

“Keep your five-year income needs in safer assets like cash, CDs or short-term bonds so that a market decline doesn’t cause you to pull out of stocks at the worst times,” she said. Then, the bulk of your savings can remain invested to allow it to continue growing when the market changes.

Track your expenses

It can be easy to assume you’ll have a lot to spend in retirement if you’ve spent years saving. But if you don’t track your expenses, your savings may run out before you know it.

“The first mistake is that people end up guessing their retirement spending without actually tracking it,” Espinoza says. “Most people underestimate their true spending numbers, and this can result in their wallet being depleted earlier than expected.”

Caro agrees: “The biggest mistake is to assume that spending will go down just because you’re retired. That rarely happens.” Many retirees like to travel or pursue hobbies, and as you age, your home or health care costs will likely increase. Plus, Caro adds, “Old spending habits don’t go away just because a paycheck goes away.”

Keep spending dynamic

Another mistake to avoid? Assuming your spending can stay the same every year.

“Retirement spending should be dynamic, higher in good markets and lower in bad years,” Caro said. “The retirees who remain empowered are the ones who are willing to adapt when circumstances change.”

In addition to tracking your spending, track the market. Pay attention to how far your dollar stretches. Save for big expenses, such as travel, for times when the market is rising, and avoid debt so you can more easily adjust your daily expenses when prices rise.

Be thoughtful about Social Security

Many Americans are concerned about the future of Social Security, but Caro and Espinoza advise not to worry too much. “I would say the anxiety is understandable, but the panic is misplaced,” Caro said.

Espinoza points out that even if Social Security’s trust fund is exhausted, retirees will still receive most of their expected benefits. Currently, the Social Security trust fund that covers retirement benefits is on track to be exhausted by 2033, but the money workers pay into it will be enough to cover 77% of scheduled benefits after that.

“The system may adjust through smaller increases in the cost of living, higher taxes, or eligibility later, but the benefits don’t go away,” Caro said.

For younger investors, experts suggest planning for retirement without relying on Social Security to create more flexibility.

“Instead of guessing about policy changes, focus on what you can control: how early you claim, how long you’ve been working, and how much private savings you accumulate to supplement your benefits,” Caro said.