Making Your Money Last: How to Not Run Out in Retirement

Making your money last means managing two risks at once: outliving your savings, and suffering a market crash early in retirement that you never recover from. When you are saving, time and the market are working for you. When you are spending, both can turn against you. The aim of a good decumulation plan is not to predict the future; it is to build something resilient enough that a bad year, or even a bad decade, does not leave you out of money. The money usually stays invested while you draw it down, so it can grow, but it can also fall in value.

This was the worry that kept me up at night before I retired: not whether I had enough on paper, but whether it would actually last if things went wrong. What settled my nerves was learning that a handful of sensible habits do most of the work. This guide covers them. It pairs closely with retirement withdrawal strategies and fits within the bigger picture in retirement planning.

Sequence-of-returns risk: the danger of bad timing

Sequence-of-returns risk is the danger that a market fall in your first few years of retirement does far more damage than the same fall later on. Here is why it bites. Early in retirement, if your investments drop and you keep withdrawing, you are selling shares at low prices to fund your spending. That locks in losses and leaves less money invested to recover when the market eventually rebounds. The exact same 20% drop in year two of retirement can shorten the life of your savings by years; in year 25 it barely registers.

You cannot control when a downturn arrives, but you can control whether it forces you to sell. That single insight drives most of the defenses below: an income floor, a cash buffer, and flexible spending all exist to keep you from being a forced seller at the worst possible moment.

The 4% rule: a starting guide

The 4% rule says you can withdraw about 4% of your savings in the first year, then adjust that dollar amount for inflation each year afterward. On a $500,000 pot that is $20,000 in the first year. Drawn from research on historical US returns, it was built to give a good chance of the money lasting roughly 30 years, and it is the mirror image of the 25x rule: 4% withdrawals imply a target pot of about 25 times your annual spending.

Useful as it is, it is a rule of thumb, not a promise. It can leave you with too much in strong markets and feel too aggressive in weak ones, and it assumes you keep raising your withdrawal even in a downturn. Use it as a sensible opening number, then stay flexible. Your investments can lose value, so no fixed rate is guaranteed.

Flexible guardrails: spend to the conditions

Guardrails are a flexible alternative to the rigid 4% rule: you set upper and lower limits and adjust your spending when your pot crosses them. Instead of blindly giving yourself an inflation raise every year regardless of what markets did, you watch your withdrawal rate. If your savings have grown and your withdrawal rate falls below a lower guardrail, you give yourself a raise. If a downturn pushes it above an upper guardrail, you trim spending a little until things recover.

This is closer to how people actually behave, and it tends to make money last longer than mechanically following the 4% rule, because it stops you draining the pot in bad years. The trade-off is that your income varies year to year. In practice it often means cutting back on the discretionary extras, travel or eating out, in a down year while keeping the essentials untouched.

A cash buffer: never sell in a slump

Keeping one to three years of spending in cash lets you avoid selling investments when markets are down. This is the practical antidote to sequence-of-returns risk. When markets fall, you spend from the cash buffer and leave your invested money alone to recover. When markets are healthy, you refill the buffer by selling some of the assets that have done well.

It is the same logic behind the bucket strategy, where the first bucket is exactly this cash reserve. Cash earns little and loses ground to inflation over time, so you do not want too much of it, but a couple of years’ worth is one of the cheapest forms of insurance in retirement.

An income floor: cover the essentials

A guaranteed income floor covers your essential spending no matter what markets do. Split your spending into essentials, the bills you must pay, and discretionary extras. Then make sure the essentials are covered by income that cannot fall: Social Security, which pays an average of about $2,071 a month in 2026 for retired workers, and, if there is a gap, a modest annuity.

With your essentials secured, a market downturn becomes uncomfortable rather than catastrophic, because you can cut the extras without risking the roof over your head. This “floor and upside” structure is the heart of annuity vs drawdown, and it is, in my view, the single most reassuring thing you can build into a plan.

Inflation: the slow leak

Inflation quietly raises your cost of living over a retirement that may last 30 years, so a fixed income buys less each year. Even modest inflation compounds: what costs $1,000 today can cost far more two decades on. Two things help. Social Security has an annual cost-of-living adjustment, 2.8% for 2026, which protects that part of your income. And keeping some of your savings in growth investments, rather than all in cash, gives your money a chance to keep pace, though those investments can fall in value. We go deeper in inflation and retirement.

Putting it together

Making your money last is not one decision; it is a set of habits that reinforce each other: a sensible withdrawal rate, an income floor for the essentials, a cash buffer so you never sell in a slump, flexibility to trim in bad years, and a plan for inflation. None of them requires you to predict the market, which is the point. Remember too that required minimum distributions from traditional accounts begin at 73 and will set a floor under your withdrawals whether you like it or not.

This is general information, not personalized advice, and your investments can lose value. For drawing down a sizable nest egg, a fiduciary advisor is usually worth it, as we cover in choosing a financial advisor, and free tools at Investor.gov and SSA.gov can help you check the numbers. To see what the early years actually feel like, read my first year of retirement.