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Could you live on your retirement savings for 23 years?

Could you live on your retirement savings for

Could you live on your retirement savings for 23 years? An online retirement calculator can help you determine how much to put away. Credit: Getty Images/iStockphoto/Creatista

Precision isn't always possible when it comes to retirement planning. That doesn't mean you have to wing it and hope your savings don't expire before you do. Looking at the income, living expenses and life spans of today's retirees can help you make the right financial moves so your golden years aren't tarnished by an unexpected shortfall.

What's an "average" retirement" cost?

Government and Gallup data reveal a lot about what retirement is like for Americans today.

It starts at age 61, even though many tell Gallup they plan to work longer. And based on some morbid math — the average remaining life expectancy of those who have made it to their early 60s (23.3 years), according to the Centers for Disease Control and Prevention — you should plan to be retired for at least a couple of decades.

Your mileage may vary based on things such as your job (accountant versus rodeo clown, for example), diet, family health history and participation in extreme sports leagues.

And the average budget for a retiree, according to Bureau of Labor Statistics data?. Older households, defined as those headed by someone 65 or older, spend $46,000 annually, versus the $57,000 average spent by all U.S. households combined. The top three monthly expenses for those 65 and older are housing ($1,322), health care ($500) and food ($484).

On average, about half of a retired household's income comes from Social Security and private and government pensions, according to the BLS, with personal savings and investment and rental income providing 6.9 percent.

How to pad your funds in retirement

If you're already retired and un-retiring or waiting to file for Social Security aren't feasible, here's how to make up for the shortfall between retirement income and expenses.

  • Leverage your home. A reverse mortgage can turn this asset into income. You'll receive a regular check as long as you're living in the house. When you exit the premises, the checks stop and your estate must repay the loan.
  • Shop for an immediate annuity. Although annuities are complex, paying a lump sum upfront to get a guaranteed monthly payment for life may provide the income stability you need.
  • Withdraw less money during down years. Common wisdom among financial pros is the 4 percent rule, which is based on research in all market conditions that shows retirees can withdraw that amount annually from a portfolio invested half in stocks and half in bonds without depleting their financial reserves before they die. If you can be flexible and withdraw less, for example, when market returns are lower than expected or you've got reserves from previous years' withdrawals, you can make your money last longer.
  • Seek assistance. Government, nonprofit and for-profit programs provide benefits to struggling seniors. The National Council on Aging (NCOA.org) helps the 60-plus set navigate things such as Supplemental Security Income, Medicaid, debt management programs and subsidized housing.

An online retirement calculator can project a more accurate picture of your retirement readiness than using estimates. It will use your current saving, spending and investment profile and some rules of thumb about historical investment returns, reasonable withdrawal rates and life expectancy. (Most calculators assume people will live into their 90s.)

What if the calculator shows that at the rate you're going, you'll outlive your retirement savings? If you're not yet retired, one of the best moves is postponing your retirement party. This strategy is especially valuable for those in their peak earning years.

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