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Cash Flow Management in Retirement: Make Your Money Last

Do I have enough money to retire? How much can I afford to spend in retirement? How do I make sure my money lasts as long as I do?

Of all the questions I receive from preretirees and retirees, the most common is: “How long will my money last?” The answer, of course, is: “It depends.”

The amount of money an individual will need in retirement depends on:

Planned annual spending. This is a critical factor that requires careful consideration. Consider tracking all of your expenses to get an idea of which ones are regular and which ones are extraordinary. For example, generally, people do not buy a new car every year. The idea is to first understand how much you are spending, then review the expenses and determine which expenses might end in a few years. For example, many retirees complete mortgage payments.

At the same time, new expenses will begin as well, such as Medicare Part B and Part D premiums and Medicare supplemental insurance. Prior to retirement, “practice” your retirement budget for 3 months. This will give you a sense of what it will be like to be “retired” and will give you time to adjust your budget accordingly.

Increased life expectancies. Americans today are living longer than previous generations. In financial planning, it is better to save more because as the saying goes, “it is better to have it and not need than need it and not have it.” Therefore, if your life expectancy is age 90, add 5 years to this and assume age 95. However, if genetics and family history suggest you will live to age 100 or 110, then it is best to plan for a much longer lifetime.

If you do expect to live into your 90s, if possible, consider working a bit longer and delay taking Social Security benefits beyond your full retirement age. If you can wait until you are 70, then you can maximize your lifetime benefits.

To get a general idea of your life expectancy and find out about your estimated Social Security benefits, you can go to or

Make your money last. This can be as simple as adding the money you have or will have at retirement and dividing this by the number of years you expect to live. For example, if you have $250,000 and expect to live 25 years in retirement, you can spend about $10,000 a year, ignoring investment returns, inflation and taxes.

Unfortunately, or fortunately, it may not be as simple as dividing your nest egg by the years you have left. It is a myth that retirees spend exactly the same amount each year. In reality, it’s possible that funding your retirement may cost more or less than what you expect.

If you are uncertain that you can stay disciplined and limit your spending, then a lifetime immediate annuity can guarantee that you will not outlive your money and provide a steady income supplement to your Social Security benefits.

The bucket list. Most people take at least one special vacation to celebrate their retirement. If this is in your plans, find out how much the trip will cost, divide it by how many years you have left before retirement and begin saving this each year. For example, if you plan to retire in 10 years and your trip will cost $10,000, then start saving $1,000 a year, or $2.74 per day, toward this goal.

To help you achieve your retirement goals, consider hiring a CERTIFIED FINANCIAL PLANNER™ professional to help set up a retirement cash flow management support system to stay on track.

A CFP® professional can share valuable insights, and alert you when your short-term spending puts your long-term financial well-being at risk. They can also help you set up a budget that takes into consideration expenses you might experience at all ages.

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