Five Ways to Avoid Running Out of Money in Retirement
Long-term care insurance, an annuity, tapping the equity in your home, and transferring some of your assets into cash and bonds can all help.


One of the biggest fears many have about retirement is running out of money. Here are five tips to mitigate this fear and improve your chances of success:
Consider buying long-term care insurance.
A major reason most people fear running out of money in retirement is an unknown major expense, which is primarily the cost of a health issue, such as cancer, a heart attack or a stroke. In my practice as a financial adviser, I’ve found I can more confidently project longer-term planning scenarios when clients have this extra ballast against the unexpected calamities in life. As a fee-only adviser I don’t sell long-term care insurance, but am an advocate of this asset for many of my clients’ retirement plans.
Alas, there are a limited number of quality companies offering this insurance, and health qualifications continue to narrow while premiums have been rising. For example, if a 50-year-old woman buys a $200-per-day benefit with a 3% compound inflation rider now, assuming premiums increase periodically, by the time she’s 75 she would have allocated about $130,000 of income or savings toward long-term care insurance premiums, assuming periodic premium increases. Due to the inflation rider on her policy, she would have a pool of almost $900,000 for long-term care needs. But if she waits until she’s 55 years old, by the time she’s 75 she would have spent about the same amount in premiums, if not more, but have $125,000 less in inflation-adjusted long-term care benefits.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
No Pensions? Think about creating your own by buying an annuity.
People can take a portion of their nest egg and buy an annuity that will pay a set amount of money for as long as they live. In effect, they can create their own pension plan. Just make sure you understand the fees and how much they will cost you. For many years I was not an advocate for annuities, but the benefits listed have caused me to rethink this for several clients:
- A Hedge Against Longer Life Spans. Longer life spans mean your money needs to last longer, too. Because annuities provide a guaranteed lifetime income, they can prevent retirees from depleting all of their assets. And since an annuity is administered by a financial or insurance company, it moves some of the longevity risk to the company offering the annuity product.
- Control Over Too Much Spending. Preserving wealth for my clients who consistently spend beyond their means is one of my biggest concerns. I find that annuities help them better budget their money. Retirees without a stable monthly income tend to tap their portfolios much more often than they realize. Some retirees also experience what I call “lifestyle creep.” For example, if they start retirement with 40% of their expenses covered by a pension or other stable monthly income source, but five years later it’s only covering 25%, it can mean their lifestyle spending is going up.
- Peace of Mind Over Stock Market Gyrations. For people who have absolutely no stomach for bear markets or stock market volatility, annuities can help prevent them from making what I call “the big mistake” – selling stocks during a big market pullback.
Run the numbers.
Third, ask your financial adviser to run a probability analysis that predicts how long their retirement savings would last in case of a major catastrophic event, such as a long decline in the stock market. At Brightworth, we conduct this kind of analysis for clients, and the results usually provide peace of mind. This exercise can show clients how their portfolios are affected under various adverse scenarios such as prolonged bear markets or excessive medical expenses. In the vast majority of cases, people still have enough money for the rest of their lives.
Think of your home as an asset.
People can consider selling their home and using the equity to pay for any unforeseen expenses. Most people count on the income from investments, Social Security and pensions (if one is available) to pay for retirement expenses. We don’t often consider downsizing or selling a home. However, this can be an asset worth hundreds of thousands of dollars that can be used for retirement expenses, if necessary. We typically advise clients to pay off their mortgages before retirement, which not only lowers their fixed monthly expenses, but adds another solid asset on the balance sheet. The home could be sold to pay for nursing home care, or the retiree could also consider a reverse mortgage if they need income to cover expenses.
Build up your emergency fund.
Keep a certain amount of your investment portfolio in cash and bonds. At Brightworth, we advise our clients to keep one to three years of cash in the bank and an additional three to five years of investments in bonds to cover living expenses. Here’s why: If the stock market craters, a person with five to 10 years of living expenses in cash and bonds can not only cover their expenses, but also preserve their investment portfolio as they are not forced to sell their stocks at temporarily low values. This strategy provides peace of mind.
For example, a person with a $1 million portfolio that’s all in stocks could see it reduced to $600,000 during a severe market downturn. If they need to sell their investments for living expenses, selling stocks while prices are low means they’ll have much less in their portfolio once the market recovers.
Following these five steps can help increase the odds that your portfolio will outlive you, and give you more confidence as you enjoy these happy retirement days.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Lisa Brown, CFP®, CIMA®, is author of "Girl Talk, Money Talk, The Smart Girl's Guide to Money After College” and “Girl Talk, Money Talk II, Financially Fit and Fabulous in Your 40s and 50s". She is the Practice Area Leader for corporate professionals and executives at wealth management firm CI Brightworth in Atlanta. Advising busy corporate executives on their finances for nearly 20 years has been her passion inside the office. Outside the office she's an avid runner, cyclist and supporter of charitable causes focused on homeless children and their families.
-
How Five States Are Worse Off After Trump’s Cuts to SNAP and Medicaid
State Tax Due to Trump's new tax law, some states will experience a greater impact than others.
-
Happiness Improves at Age 50, Right? Maybe Not for Everyone
New thinking about how happiness changes over our lifetimes shows that one group in particular gains the most contentment after age 50.
-
The Truth About the Dark Side of Rooftop Solar Panels
Rampant bankruptcies in the solar panel industry have left many consumers with systems that don't work and no way to get them fixed. Worse, they're being hounded to keep paying despite not receiving what they were promised. What can they do?
-
Six Big Beautiful Opportunities: Advisers' Guide to Tax and Client Strategies
Here are several ways financial professionals can help their clients maximize opportunities in the One Big Beautiful Bill Act, which extends key TCJA provisions, introduces increased deductions for people 65 and older and more.
-
Five Ways to Maintain Charitable Giving During Volatile Times: A Giver's Guide
When the economic outlook is uncertain, charitable giving is even more important — and impactful. You can be strategic by using donor-advised funds, diversifying assets and prioritizing unrestricted gifts.
-
Avoid Medicare's 'Shadow Tax' With This Financial Expert's IRMAA-Busting Tips
You're cruising along in retirement, and then bam: Your Medicare premiums soar because your income crossed the limit. Take a breath. There could be a solution.
-
Grilling Season and ETFs: There's More Than One Way to Cook Up a Portfolio
Exchange-traded funds come in a multitude of 'flavors' these days, from passive to active to factor-based. Their flexibility is what makes them so delicious.
-
You Don't Want It, But You Should Plan for It Anyway: An Expert Guide to Long-Term Care
Planning for long-term care is crucial to protect your independence, family and financial stability against unexpected health events and rising care costs not covered by standard insurance.
-
You Don't Want Just a Financial Plan: You Need a Purpose and Retirement Ideals
These five questions will help you drill down to what you really want out of retirement. Then you can get down to the business of crafting a financial plan to make it happen.
-
I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting By
Learning good financial habits — building an emergency fund, paying down debt, saving consistently — gives you flexibility, options and a path to security.