How to Ease Your Fears of Running Out of Money in Retirement

There's no magic dollar amount you should save to guarantee you'll be fully funded in retirement. After all, it's impossible to predict healthcare needs, life expectancy or the impact of inflation. So what can you do if it feels like you'll never have enough?

This uncertainty can cause emotional stress for many would-be retirees, regardless of what they've already done to plan for the future. But no amount of worry will grow your account balances. Instead, it's important to focus on factors that are under your control.

Easing fears about retirement

"Financial planning, in my opinion, is 80% psychological and 20% math," says Craig Shively, a financial planner with First Citizens Investor Services. "Retirement planning is not just about the numbers. It's asking, 'What is retirement going to look like? What do I really need to survive? What do I need to be happy?'"

Addressing those questions may require you to consider other big ones, like whether you'll move to another location or if you're prepared for any health challenges that may lie ahead.

To feel more secure about your retirement plan, you need to identify your retirement goals and find ways to meet them—even if that means making sacrifices or getting creative about how you define retirement. Instead of spinning your wheels about what may or may not come to pass, follow these steps to help ease your retirement-related fears.

1 Know where your money's going now

What's the best way to confirm you can live on a budget once you're retired? "Live on one now," Shively says. If you don't currently have a budget, take time to create one. Tools like online budget calculators have made that easier than ever before. Be sure to review your budget quarterly—or at least every 6 months—to see if you need to adjust.

And look for areas where you can reduce spending—such as canceling subscriptions or consolidating debt—to save more for retirement. Having a better handle on your finances today "goes a long way toward minimizing that risk of running out of money once you're retired," Shively says.

2 Picture how you'll want to live

Retirement looks different for everyone. Think realistically about how you'll spend your time in retirement and consider what matters most. Are you hoping to travel extensively? Visit with your grandchildren? Move to an area with a lower cost of living?

The answers to these questions will influence how much money you'll need to fund your definition of living well. Also, recognize that your envisioned retirement lifestyle will likely evolve as you age. Keep in mind that healthcare expenses may increase over time—data from the Center for Retirement Research shows that out-of-pocket healthcare costs consume about 12% of income for the typical retiree. Meanwhile other expenses, such as travel, may drop.

3 Plan beyond your needs

If you can afford to do so, planning for an annual spending amount that exceeds your life expectancy may help you feel financially prepared for retirement.

"If life expectancy says you're supposed to live until 75, plan to 90, just to temper that longevity risk," Shively says. "If you live to be 90, great. If not, you've got funds left over that your loved ones or your favorite charity can inherit from you."

4 Work with a financial professional

One of the best things you can do to adequately plan and manage your retirement—and your not-enough-money worries—is to work with a trusted financial advisor, Shively says. A financial professional can help you plan a realistic and attainable retirement lifestyle, set measurable financial goals to help you get there and adjust the plan as time passes.

"Those adjustments may be in response to thorny issues such as market appreciation, inflation and return rates on investment portfolios along with other factors that can be daunting for many people to self-manage," he adds.

"Working with a financial professional on the budgeting and the investment pieces may help ensure everything in your financial plan is working to help you meet your goals."

5 Reimagine what retirement might mean

The cultural definition of retirement is shifting. More people are working longer, into their 60s and 70s in some cases. Per Bain & Company, 41% of workers expect to work beyond age 65 in some way, assisted by the flexibility of remote work.

"I think retirement is going to become more fluid," Shively says. "Maybe we take a step back from working full-time to part-time. Or work significantly longer than generations past."

All of this means that while it's good to plan as if you won't have earned income during retirement, that may not be the case. If you're not confident that your retirement savings will cover your long-term living costs, perhaps your retirement plan should include a lower-stakes or part-time job to supplement your savings.

6 Don't let fear drive your decisions

Shively acknowledges that talking about aging isn't always fun, but "the sooner you can have those conversations, the sooner you can begin framing your retirement goals and come up with a plan to get there." In other words, if the discomfort of thinking about aging prevents you from beginning to plan for retirement, you do yourself a serious disservice—and potentially cost yourself the future comfort you desire.

Likewise, if your fear of not having enough money in retirement propels you to go overboard with planning, you risk costing yourself quite a lot.

"When I see people that are just obsessed with budgeting and saving, and they're lowering expenses to where they're not spending time with friends and family, my advice is to live a little," Shively says. "Keep maxing out your 401(k), keep maxing out your IRA. Be diligent about your savings, live beneath your means and have fun along the way."