For many people, retirement is the time to finally relax and enjoy life after years of hard work. A time to travel, pursue hobbies and spend quality time with family. However, for others, it can quickly become a time of financial stress and difficulty.

With the rising cost of living and unforeseen expenses, it’s not uncommon for retirees to outlive their savings.

Why Do Some People Run Out of Money in Retirement?

There are a number of reasons why retirees may find themselves struggling financially. One of the most common is simply not saving enough for retirement.

According to a recent study by the National Institute on Retirement Security, the median retirement account balance for working-age Americans is just $3,000. This is far below what most financial experts recommend.

Another reason retirees may run out of money is unexpected medical expenses. As we age, the likelihood of developing health problems increases, and the cost of medical care can be significant.

In fact, a recent study found that the average 65-year-old couple will spend around $275,000 on healthcare expenses throughout their retirement.

Finally, some retirees are simply too generous with their money. They may want to help out family and friends, or enjoy an extravagant lifestyle that they can’t really afford.

While it’s certainly admirable to be generous and enjoy life, it’s important to do so in a way that doesn’t put your financial security at risk.

Who is Most at Risk of Running Out of Money?

While anyone can find themselves struggling financially in retirement, there are certain groups that are more at risk than others. These include:.

1. Women

Women are more likely than men to live longer and have higher healthcare costs in retirement. They are also more likely to take time off work to raise children, which can impact their savings and social security benefits.

2. Low-Income Individuals

Those with lower incomes tend to have less access to retirement savings plans and are less likely to have saved enough for retirement.

3. Divorced or Single Individuals

Single retirees often have fewer financial resources than those who are married. Divorce can also have a significant impact on retirement savings, particularly for women.

4. Those with High Debt Levels

Retirees with high levels of debt may struggle to make ends meet, particularly if they are making high interest payments each month.

How to Avoid Running Out of Money in Retirement

If you’re worried about running out of money in retirement, there are steps you can take to protect your financial security:.

1. Start Saving Early

The earlier you start saving for retirement, the better off you’ll be. Even small contributions can add up over time thanks to the power of compound interest.

2. Live Within Your Means

While it’s tempting to spend money on the things you’ve always wanted to do, it’s important to live within your means. Create a budget and stick to it, and avoid taking on unnecessary debt.

3. Consider Downsizing

If you own a large home or have a lot of possessions, downsizing can be a great way to free up cash in retirement. Consider moving to a smaller home or selling off items you don’t need.

4. Work with a Financial Advisor

A financial advisor can help you create a retirement plan that meets your needs and helps ensure you don’t run out of money. They can also help you understand your Social Security benefits and other retirement income sources.

5. Invest Wisely

Investing wisely can help ensure your retirement savings last as long as possible. Consider working with a professional to create a diversified investment portfolio that matches your risk tolerance.

The Bottom Line

Retirement is a time to enjoy the fruits of your labor, but it’s important to plan ahead to ensure you don’t run out of money.

By taking steps to save early, live within your means, and work with a financial advisor, you can help ensure a happy and financially secure retirement.