How To Make Your Money Last In Retirement | Tips & Tricks
Saving For Retirement

For all the joy and freedom that retirement can bring, it also often arrives with a little anxiety. Suddenly the paychecks stop and it’s time to rely on your hard-earned nest egg for daily income. At this point, we hope you have learned how to make your money last.

Will you be able to withdraw enough to live out your retirement dreams without running out of money? Dustin Cunningham, a CFP® at Trust Point, is well versed in addressing this question.

“Usually the biggest question that retirees have or the hardest part for them is what they’re actually going to spend in retirement,” Cunningham says. “Figuring out what they’re going to need to live on to accomplish their goals.”

The answer is different for everyone, of course, but the steps taken to arrive there are the same. Cunningham walks us through the process:


“First we want to find out what your goals are, what your retirement plans are, and what you want to spend,” Cunningham says. Then we can figure out how to make your money last.

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Calculating your annual pre-retirement expenses can help, but it’s important to consider lifestyle changes. Some people want to travel, some change their living situations, or take up a new hobby—lifestyle changes come with expense changes.

Other considerations include whether you want to give to charity or leave a legacy for your children or others. If that’s not the case and you want to use all of your funds during your lifetime, one can have a more significant draw rate. As you are determining your retirement goals and budget, it is important to consider all of the financial aspects of the life you want to live.

Trust Point offers a questionnaire to help start this dialogue, but one-on-one or family conversations with an advisor can be a big help.

“There are unknown factors such as health issues and sickness that can change the latter end of withdrawals, but we want to get to know you, get to know your goals and values,” Cunningham says.

And regardless of your spending plans in retirement, Cunningham advises building up six to 12 months worth of savings before retirement to account for potential market shifts.

“Then you don’t have to draw down on your assets in a correcting market,” he says.

Trust Point will also help to evaluate every asset, from social security to pension income to investment portfolios. Are the portfolios taxable, tax-deferred, or tax-free? It is important to understand the tax implications of where to draw assets from as certain account types may have tax advantages or disadvantages. A well-thought-out decumulation strategy can help reduce taxes in retirement and ensure a more sustainable distribution pattern.


learning how to make your money last for a retired couple

One of the best-known strategies for withdrawing from retirement accounts—from 401(k)s to IRAs—is the 4 percent rule. This is a great way to make your money last into retirement.

Developed by financial adviser William Bengen in the 1990s, the rule essentially states that starting retirement with a 4 percent withdrawal rate and adjusting for inflation should extend the life of a portfolio for more than 30 years. Of course, that assumes you have saved enough (saving 25 times your annual expenses is another widely accepted rule).

“I wouldn’t say that it’s the golden rule for everyone to follow verbatim because everybody’s goals are unique to them,” Cunningham says of the 4 percent rule. “But it is definitely a benchmark to start with.”

To maintain a 4 percent distribution rate, Cunningham suggests a balanced portfolio of 50 to 60 percent stocks and the balance in bonds, though that can change over time as interest rates normalize or increase. If there is a low interest-rate period, equities may be more important than bonds to keep up with growth and distribution rates, and in a high interest rate period, bonds become more attractive, he says.

The first few years of retirement can involve some trial and error as retirees adjust to their new life and get a better handle on their monthly and annual budgets. Cunningham says he tries to stay conservative during this time—keeping the withdrawal rate near 4 percent—as to not overstate projections. New retirees tend to be on the same page.

“More often than not I find that retirees are more cautious in their spending habits,” Cunningham says. “They are adjusting to not having that monthly paycheck so they tend to put off some bigger purchases, such as another car.”

But after getting beyond those initial adjustments, the “go-go” phase of retirement in which a retiree is most active tends to begin. That can lead to adjustments.

“It’s never set it and forget it,” Cunningham says. “We are actively managing the portfolio and distribution rate and communicating with clients.”


Another common question Cunningham fields from retirees is how to get paid. After years of scheduling life— everything from grocery shopping to date night to large purchases—around a paycheck schedule, that schedule is gone. But it doesn’t have to be.

Trust Point can work with you to receive distributions monthly, quarterly, annually—whatever works, as long as it also works best for the plan and doesn’t impact the sustainability of resources, or their potential for growth. With a careful balance between spending and portfolio management, it is possible to make money in retirement.

“If you manage toward a 4 percent distribution rate and you have a portfolio with an expected rate of return of 6 percent, you can maintain or grow that principal,” Cunningham says. “Obviously we want to keep up with inflation, so those dollars continue to purchase the same amount of goods today as they do 10–15 years from now.”

He says it’s also important to be mindful of long-term investing. There will be periods of positive returns and periods of negative returns. As fiduciaries, Trust Point advisors work in your best interest.

“Don’t let emotions kick in during volatile markets,” Cunningham says. “Stay the course that’s in line with your long- term objectives and goals.

The good news for many early retirees, Cunningham says, is that a later withdrawal is preferable to avoid being pushed into a higher tax bracket. Social Security is a key consideration when developing any Trust Point client’s retirement plan and whether taken early or late,  the funds will be used for the greatest benefit.

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