8 Ominous Signs You’ll Run Out of Money in Retirement

8 Ominous Signs You’ll Run Out of Money in Retirement

Retirement is supposed to be the golden years when you can relax and enjoy life after decades of hard work. However, countless retirees face the grim reality of outliving their savings and struggling to make ends meet. Unfortunately, many don’t recognize the warning signs until too late.

This article highlights eight troubling indicators that you may deplete your retirement savings prematurely. Spotting these red flags early and adjusting can help avoid significant financial hardship. We’ll also look at a case study of someone who made necessary changes upon recognizing ominous signs in retirement planning.

1. Insufficient Savings

Retirement experts recommend benchmark savings amounts based on your current income and age. For example, Fidelity suggests having at least 1x your salary saved by age 30. By age 50, that should increase to 6x your income.

Failing to hit these benchmarks indicates you likely won’t have enough to maintain your lifestyle when you stop working. Even minor savings shortfalls compound over decades, becoming giant gaps by retirement age.

Take stock of where your savings stand relative to target amounts. An online retirement calculator helps determine if you’re on track or need to make adjustments.

2. High Debt Levels

Carrying significant debt into retirement severely threatens financial security. When chunks of each payment go toward interest instead of spending, it strains limited retirement income.

Ideally, you should enter retirement debt-free, apart from a manageable mortgage. If obligations like credit card balances or auto loans exceed 10-20% of your monthly income, it’s time to attack that debt aggressively. Explore consolidating or restructuring payments to pay it off before retiring.

3. Lack of a Budget Plan

When retirement arrives, income sources change, and free time increases. Without a spending strategy, many new retirees find themselves overspending unknowingly. Months or years pass before they realize they’re withdrawing too much too soon from savings.

Creating a retirement budget provides structure and accountability. Categorize expected recurring costs like housing, food, and healthcare—including lifestyle expenses like travel and gifts. Work backward to calculate the yearly withdrawal rate your current savings can sustain.

4. Overreliance on Social Security

While Social Security benefits offer a monthly income source, they rarely suffice as a sole revenue stream. The average 2022 monthly payment came out to just $1,668. Trying to live on that alone would lead most retirees to depletion of quick savings.

Ideally, Social Security payments should account for no more than 35-40% of retirement income. Retirees must supplement with pension payments, 401k/IRA withdrawals, and other income.

5. No Emergency Fund

Late-career workers often finally see their basic living expenses covered and a chance to build savings. But unexpectedly losing that income source means many retirees fail to prepare for surprise costs.

Without cash reserves, unforeseen house repairs or medical bills threaten to decimate retirement budgets. Experts recommend having several years of basic living expenses in safe emergency accounts. CD ladders, money market funds, and short-term bonds can provide easy access.

6. Healthcare Costs Underestimation

While newer retirees benefit from Medicare coverage, they still face copays, deductibles, and out-of-pocket costs. As you age, the decline in health causes expenses to multiply rapidly.

Many prematurely deplete savings when hit with debilitating illnesses requiring frequent treatment or long-term care. Consult healthcare.gov for estimates based on conditions and coverage. Also, factor geography, as costs range drastically across the country.

7. Lifestyle Inflation

After decades of working, some retirees use their newfound free time and income from savings to increase spending. Travel, dining out, golf club memberships, and new cars suddenly cram their budget. This “lifestyle inflation” flies under the radar until the damage is done.

Combat this spending creep by establishing a withdrawal rate below 4% annually from retirement savings. Create an essential vs. discretionary spending breakdown. And remember, enjoying retirement doesn’t require spending more. Find free hobbies like hiking or library books.

8. Inadequate Investment Diversification

Concentrating retirement investment assets in only one or two areas brings excessive risk. Scenarios like the 2001 dot com crash or the 2008 housing crisis showed even “safe” assets can take massive hits.

Consult investment advisors to ensure your portfolio holds a diverse mix of stocks, bonds, real estate, commodities, and cash across capitalization sizes, sectors, and geographies. This balanced allocation helps mitigate against market turbulence, depleting too much savings.

Case Study: John’s Story

John worked as a high school math teacher and as an adjunct professor at a local college. He contributed regularly to his 403b plan and felt confident about having $1.2 million saved up when he retired at 64.

However, John made several missteps that threatened the longevity of his retirement savings. He carried $85k in credit card and student loan debt from putting his kids through college. He had no idea what his retirement expenses would be and did no budget forecasting.

John planned to rely solely on Social Security, pensions, and retirement account withdrawals with no other income. He also concentrated 80% of investment assets between tech stocks and a sector energy fund.

When John made some retirement planning projections, he felt alarmed seeing how rapidly his savings shrank across 30 years. He shifted gears and made several significant changes:

  • Set up an emergency fund with two years’ worth of spending needs
  • Consulted a fee-only financial planner for advice
  • I began working part-time as an adjunct professor for extra income
  • Diversified investments more broadly across many fund types
  • Paid off all outstanding debts
  • Crafted a detailed retirement budget aligned to a 4% withdrawal rate

Getting back on track with those steps helped John regain confidence about enjoying his retirement years without worrying about outliving his savings. He still lives comfortably on $80k annually through disciplined budgeting and wise financial moves.

Key Takeaways

  • Benchmark current retirement savings vs. targets to identify shortfalls early
  • Pay off debt obligations before entering retirement
  • Create an essential expenses budget aligned to a 4% annual withdrawal rate
  • Supplement Social Security with other income like pensions and part-time work
  • Build an emergency fund equal to 2-5 years of spending needs
  • Utilize a diverse mix of investments across many fund types to mitigate risk
  • Avoid spending increases in big-ticket lifestyle inflation areas


By recognizing ominous signs in time and making adjustments, you can take control and help secure financial stability in your retirement years. But if you already identify with several warning signs, it’s not too late to start planning! Consult fee-only financial planners to create a personalized strategy. Finalizing retirement preparations isn’t exciting. But would you rather sacrifice some time and money now or risk running out later and needing to cut back spending in your golden years drastically? Protect your retirement by facing these warning signs before it becomes a crisis. The relief from securing your financial future is truly priceless.