Between retirement savings and Social Security income, do you know how long your nest egg will last?
According to a new survey commissioned by asset management firm Schroders, 62% of retired Americans don’t know how long their savings will last. While 40% are confident they have enough money, 45% say their expenses in retirement are higher than they expected
The reason for these eye-popping numbers? A growing number of U.S. retirees are worried about the impact of rising prices.
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What fuels retirement anxiety
Concerns about rising prices from retirees stem from several factors. Here are the top five worries cited by retired survey respondents.
- 1. Inflation eroding savings: 92% are worried about cost-of-living increases impacting asset value.
- 2. Health care costs exceeding expectations: 86% are concerned about the cost of medical bills in retirement.
- 3. A steep market downturn: 80% flagged a significant downturn in the market as a major worry.
- 4. Confusion over how to draw down savings: 71% are uncertain about an optimal spending and income-generating strategy.
- 5. Outliving their money: 70% of respondents fear longevity.
“Rising prices on essentials like housing, food and health care have significantly diminished the purchasing power and financial security of retirees,” Deb Boyden, head of U.S. defined contributions at Schroders, said in a statement.
In addition, 84% of retirees wish they could better protect their savings from inflation impacts.
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How retirees can strengthen their financial resilience
While retirement can be unpredictable, avoiding paralysis is possible. With inflation being the main driver of concern for so many, here are some ways retirees can protect their savings from its effects.
Diversify income and asset streams
Adding inflation-resistant assets to your portfolio can help. For example, TIPS (Treasury Inflation Protected Securities) are sold for 5-, 10- or 30-year terms and offer fluctuating principals over that term. At maturation, if the principal is higher than the original amount, the increased amount stands, but if the principal is equal to or lower than the original amount, the original amount stands.
Dividend-growing equities and annuities are other options to explore that can bolster fixed income sources against rising prices. If you’re able, a part-time job or side hustle can also help stretch the lifespan of your savings.
Smart withdrawal strategies
A long-standing retirement withdrawal strategy is the 4% rule, which involves withdrawing 4% of savings annually, adjusting for inflation each year. This approach, with the right management, is designed to make your nest egg last 30 years.
But the 4% rule isn’t the only withdrawal strategy that exists. One alternative is to use a dynamic, flexible approach that adjusts your spending each year based on needs, investment performance and life expectancy.
Plan for health care costs
Retirees who responded to the Schroders survey reported spending an average of 15% of their monthly income on health care costs. It can pay to incorporate these expenditures into your long-term planning.
According to Fidelity Investments’s latest health care cost report, a 65-year-old retiring in 2025 can expect to spend an average of $172,500 on health care and medical expenses in retirement — a 4% increase from the previous year.
Boost financial literacy and support
Around 25% of retired Schroders survey respondents say they’ve lost sleep worrying about finances, while 27% report spending an hour or more per day stressing over money.
Financial advisors can often be an untapped resource of financial literacy and support. Working with an accountant or a counsellor can help you create a sustainable income strategy in retirement that adjusts to changing economic needs.
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With a writing and editing career spanning over 15 years, Emma creates and refines content across a broad spectrum of industries, including personal finance, lifestyle, travel, health & wellness, real estate, beauty & fitness and B2B/SaaS/tech.
