Running out of money in retirement is become one of the defining fears of modern life. According to the 2025 Annual Retirement Study by Allianz Life, 64% of Americans say they’re more worried about running out of money than dying. That’s not a small or niche anxiety. It’s a majority of the country.
And the concern is grounded in reality. Research from the Morningstar Center for Retirement & Policy Studies found that nearly 45% of Americans who retire at age 65 are likely to run out of money before they die.
The good news: running out of money in retirement is not inevitable. With the right planning started early and revisited often, you can improve your odds of a financially secure retirement. Here’s what puts people at risk, and what you can do about it.
What Can Make You Run Out of Money After Retirement?
There is no single cause. Several factors can combine to drain retirement savings faster than expected.
Market Volatility and Down Markets
Bear markets and economic recessions can reduce portfolio values, especially for retirees who are drawing down assets rather than adding to them. Unlike working-age investors who can wait out a downturn, retirees may be forced to sell at a loss to cover living expenses. This is known as sequence-of-returns risk.
This is why diversification matters so much in retirement. Relying too heavily on any single asset class, particularly equities, leaves retirees exposed during downturns. A well-structured retirement portfolio typically balances growth investments with more stable income-generating ones, such as bonds and annuities, to provide a reliable income stream even when markets struggle.
Investment Returns That Fall Short of Expectations
Many retirees build their financial plans around projected investment returns and when those returns underperform, the gap can be significant. This is especially true for retirees whose plans were built on aggressive assumptions during strong market periods.
Understanding the risk profile of every investment in your retirement portfolio is essential. More conservative investments like bonds, CDs, and annuities may offer lower returns, but they also provide the predictability and stability that retirement income planning requires.
Longevity and Rising Healthcare Costs
Advances in medical research have extended lifespans and while that’s a remarkable achievement, it also means retirement savings need to stretch further than previous generations anticipated. A longer life is a financial planning challenge as much as a personal blessing.
Healthcare costs are one of the largest and fastest-growing expenses in retirement. According to Fidelity Investments’ 2025 Retiree Health Care Cost Estimate, a 65-year-old retiring today can expect to spend an average of $172,500 on healthcare and medical expenses throughout retirement, a figure that has risen more than 4% since 2024 and more than doubled since Fidelity’s first estimate in 2002.
For those with chronic conditions, the numbers are even higher. The 2025 Milliman Retiree Health Cost Index projects that a healthy 65-year-old woman retiring today could face up to $313,000 in total healthcare expenses over the course of her retirement, compared with approximately $275,000 for a man with a similar health profile. These figures don’t include long-term care costs, which can easily add tens of thousands more per year.
Despite these realities, a 2025 Fidelity report found that 1 in 5 Americans has never even considered healthcare costs when planning for retirement. This is one of the largest, yet correctable gaps in retirement planning today.
Solutions for Avoiding Running Out of Money After Retirement
Start Saving Early and Keep Going
Time is the single most powerful variable in retirement planning. The earlier you start, the more compound growth works in your favor and the less you ultimately need to contribute to reach the same goal.
Contributing to a 401(k), IRA, or other tax-advantaged retirement account as early and consistently as possible is the foundation of a strong retirement strategy. Most financial professionals suggest saving 10–15% of pre-tax income for retirement, though that target can vary based on your age, goals, and current savings. If you’re behind, increasing your contribution rate even by one or two percentage points can have a meaningful impact over time.
If you’re 50 or older, catch-up contribution provisions allow you to contribute more than the standard annual limits to most retirement accounts, giving you an opportunity to accelerate savings in the final years before retirement. The average amount of Americans believe they need to retire comfortably at $1.26 million a figure that underscores the importance of consistent, long-term saving.
Consider Working Longer
Working even a few additional years can dramatically improve retirement security. Morningstar research indicates that logging an additional five years in the workforce can substantially improve the odds of not running out of money in retirement. Working longer also means additional years of contributions, fewer years of drawing down savings, and potentially higher Social Security benefits by delaying when you claim them.
This trend is already well underway. In 2024, 37% of people age 55 and older were still employed, and that number continues to grow. For many, working into their late 60s, whether full-time or in a part-time or consulting capacity, is both a financial strategy and a source of continued purpose and engagement.
Build a Realistic Budget and Stick to It
One of the most common mistakes retirees make is underestimating how much they’ll actually spend. While some cost, like commuting or work clothing, naturally decrease, others, particularly healthcare and home maintenance, often increase substantially.
Creating a detailed retirement budget, one that accounts for healthcare inflation, potential long-term care needs, and unexpected expenses, is a critical step. For many retirees, downsizing a home, reducing discretionary expenses, or relocating to a lower cost-of-living area can meaningfully extend the life of their savings. The key is being honest about future spending rather than planning around an optimistic projection.
Diversify Your Income Sources
Relying on a single source of retirement income, whether it’s a 401(k), Social Security, or a pension, creates vulnerability. A more resilient retirement income strategy typically draws from multiple sources: tax-deferred accounts, Roth accounts (which provide tax-free withdrawals in retirement), Social Security benefits, and potentially annuities, which can provide guaranteed income for life regardless of market performance.
Social Security, while valuable, is not sufficient on its own for most retirees. Among elderly Social Security beneficiaries, approximately 45% of single adults and 21% of married couples rely on it for 90% or more of their income, a precarious position that leaves little margin for unexpected expenses. Diversifying income streams well before retirement is one of the most effective strategies for long-term security.
The Bottom Line
Retirement financial security doesn’t happen by accident. It requires deliberate planning, honest projections, and consistent action taken over decades. The risks are real, from market volatility to rising healthcare costs to the simple reality of living longer, but none of them are unmanageable with the right strategy in place.
Yet only 23% of Americans who worry about running out of money have actually discussed that concern with a financial professional, down from 28% the prior year. That gap between worry and action is where the real risk lives.
Speak with a qualified financial professional from Barnum Financial Group today. The earlier the conversation starts, the more options you have and the greater the chance that your savings will outlast your retirement, not the other way around.
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