Date: February 26, 2024

Will Your Nest Egg Survive Retirement? Answers For Your Top Concerns!

Back in the day, it was standard practice to work until 65 and, in theory, be relegated to a rocking chair or recliner for the remainder of your years. The good news is that retirement today differs significantly from what it used to be for our parents and grandparents. In modern times, retirement takes on a whole new meaning as people are much more healthy and active and want to experience more of what life offers once they stop working full-time.

The flip side of retirement is whether you will have enough money to sustain the type of retirement that you’ve been planning for. The number one question I get asked regularly is, “Will I run out of money late in life?” This is a frequent question because my clients recognize they may be retired for 30 or more years.

As a fiduciary fee-only financial advisor in Hartford, we specialize in helping pre-retirees develop robust retirement plans that answer some of the top retirement concerns that can arise. 

Concern #1. Am I Saving Enough for Retirement?

This depends on several factors, including how you envision your retirement lifestyle, your projected lifespan, and your post-retirement cost of living. 

While there are many ways to calculate whether you’re saving enough for retirement, here are three of the more common approaches to help you assess if you are saving enough to fund decades of retirement:

  • The 25x Rule: This rule suggests saving at least 25 times your annual pre-tax living expenses after you retire. This is based on the assumption that a 4% annual withdrawal rate from your savings each year, plus Social Security, should sustain your standard of living without requiring you to spend your principal.
  • Replacement Rate Method: This method estimates the percentage of your current income you’ll need to maintain your desired retirement lifestyle, typically at least 70-80%. Calculate your current income during your working years, and then use this 70% or 80% to determine your minimum retirement income requirements. Will the assets in various retirement and savings accounts produce this amount of assets? Keep in mind that early retirement can exceed costs in late working years if you plan expensive travel or purchase a second home.
  • Goal-Based Savings: Set specific retirement goals based on your desired lifestyle, including travel, hobbies, and living arrangements. Estimate the annual costs associated with these goals and use a retirement calculator to determine how much you need to save each year to achieve these goals by your desired retirement age.

If your calculations fall short, you can consider:

  • Increasing retirement contributions: Allocate more towards retirement plans like 401(k)s or IRAs
  • Delaying retirement: Working longer allows for more savings and a smaller benefit gap
  • Downsizing expenses: Evaluate spending habits and identify areas for cost reductions

Concern #2. Social Security: Friend or Foe?

Many people think that when you turn 65, it’s time to start taking your Social Security benefits. But, you should calculate if that is your best short-term strategy. Here’s why. 

Deciding when to start receiving benefits affects the monthly amount you’ll receive. If you claim benefits before your full retirement age (FRA), which varies depending on your birth year, your benefits will be reduced. 

For instance, let’s assume you were born in September 1961, making your FRA 67. However, you are eligible to begin receiving benefits at 62. For illustration purposes, your monthly benefit would be $2466 at age 62. If you wait until age 67 to begin taking benefits, the monthly benefit would be $3475; if you waited until age 70, your benefit would be $4337.

Your decision should align with your overall income needs, considering health, life expectancy, employment status, and other income sources. Each person’s situation is unique, and what works for one may not be ideal for another. 

As a fee-only financial advisor in New Haven, CT, we can assist in analyzing your specific situation and recommend the optimal age to claim this benefit.


Watch our founder, Paul Schatz, discuss timing your Social Security benefits.


Concern #3. Healthcare Needs

The good news is that when you turn 65, you can begin taking advantage of Medicare. The bad news is that as you age, more health-related issues may arise that can put undue pressure on your retirement savings if not planned for beforehand. 

Healthcare expenses represent a significant consideration as you approach retirement. Planning for these expenses is crucial because it helps ensure you have sufficient funds to cover medical bills without prematurely depleting your retirement savings. 

As a way to combat these expenses, consider these strategies before you retire:

  • Utilize an HSA (Health Savings Account) to save for future healthcare costs. Contributions are tax-deductible, and funds can be withdrawn tax-free for qualified medical expenses. This account can be a powerful tool for accumulating funds earmarked explicitly for retirement-related and health-related expenses.
  • Investigate long-term care insurance to cover costs not typically covered by Medicare, such as nursing home care or in-home health services. Purchasing a policy before retirement can help manage the high costs associated with extended healthcare needs.
  • Before retiring, get familiar with Medicare coverage options, including supplemental coverage costs. Understanding the different parts of Medicare, including Part A for hospital insurance, Part B for medical insurance, and Part D for prescription drug coverage, will help you fund potential healthcare expenses and budget accordingly.

Concern #4. Inflation

Inflation significantly impacts retirement planning because it erodes the purchasing power of your savings over time. As your cost of living increases, the money you save for retirement will buy less and less. 

This makes it crucial for retirement strategies to allow for inflation, ensuring that retirement funds grow at a rate that at least matches inflation plus distributions. This ensures that your savings retain their purchasing power over the years, allowing for a stable and secure financial future in retirement. 

Including investments that traditionally outpace inflation, such as stocks or real estate, can be a strategic approach to safeguarding your retirement savings against the diminishing effects of inflation. Think of it this way: If inflation is 3% and your withdrawal rate is 4%, you need 7% over longer periods to break even. 

Regularly reviewing and adjusting your retirement plan can help keep your savings on track to meet your financial needs in your later years despite the ongoing challenges of inflation and withdrawals.

How Heritage Capital Can Help with Your Retirement Planning Needs

Complex tax strategies, estate planning, and managing multiple income streams during retirement require specialized knowledge. That’s why you should consider partnering with a high-net-worth retirement planning specialist who understands the intricacies of wealth management and can tailor strategies for your specific needs.

We’ve been helping successful individuals and their families plan for and realize their retirement dreams for over 20 years. If you’re concerned about your retirement assets and whether you’ve saved enough, let’s talk. There is no cost, and what you learn can be a game changer.

plan a bulletproof retirement


Paul Schatz, President, Heritage Capital