Retirees Depleting Savings: 8 Steps to Protect Your Money

Why Retirees Are Depleting Savings Faster Than Ever—and What to Do About It

I’ve been a Certified Financial Planner for 18 years, and I’ve never seen the level of anxiety among retirees that I’m seeing right now. The numbers back it up: a 2025 survey from the Employee Benefit Research Institute found that 40% of retirees report spending more than they planned, with inflation and healthcare costs cited as the top two culprits.

Here’s the reality. The cumulative effect of inflation since 2020 has eroded purchasing power by roughly 21%, according to Bureau of Labor Statistics data. Social Security cost-of-living adjustments (COLAs) have helped—the 2025 COLA was 2.5%, and early forecasts suggest a 2027 COLA near 2.8%—but those adjustments consistently lag behind the real costs seniors face, especially for food, housing, and medical care.

If you’re a retiree watching your nest egg shrink faster than expected, this isn’t the time for panic. It’s the time for a plan. Below, I’m walking you through the exact eight steps I use with my own clients to stop the bleeding and extend the life of their retirement savings.

Step 1: Run a Brutally Honest Cash Flow Audit

Before you can fix anything, you need to know exactly where your money is going. I’m not talking about a vague budget—I mean a line-by-line accounting of every dollar that left your accounts over the past 90 days.

What I see most often is that retirees underestimate their spending by 15–25%. Subscriptions stack up. Dining out feels modest until you total the receipts. Insurance premiums creep higher each year without a second glance.

How to Do This Right

1. Download the last three months of bank and credit card statements.
2. Categorize every transaction: housing, healthcare, food, transportation, insurance, subscriptions, discretionary, and gifts/donations.
3. Compare your total monthly spending against your total monthly income (Social Security, pensions, withdrawals, part-time work).
4. Identify your “gap”—the amount you’re withdrawing from savings each month beyond what income covers.
5. Flag the three largest discretionary categories where cuts would be least painful.

If your gap is more than $500/month, that’s $6,000+ a year draining from your portfolio. Over a decade, with lost compounding, that could represent $80,000–$100,000 in depleted wealth.

Step 2: Recalculate Your Withdrawal Rate

The old “4% rule” was developed by financial planner Bill Bengen in 1994, based on historical market data. It suggested retirees could withdraw 4% of their portfolio in year one, adjust for inflation each subsequent year, and not run out of money over 30 years.

In my practice, I’ve moved away from the rigid 4% rule for most clients. With today’s market volatility, longer life expectancies, and persistent inflation, I often recommend a dynamic withdrawal strategy that flexes between 3.0% and 4.5% depending on market conditions.

Dynamic Withdrawal Rate Guidelines

Market Condition	Portfolio Performance (Prior Year)	Suggested Withdrawal Rate	Example on $500,000 Portfolio
Strong bull market	+15% or more	4.5%	$22,500/year
Moderate growth	+5% to +14%	4.0%	$20,000/year
Flat or slight decline	-5% to +4%	3.5%	$17,500/year
Bear market / recession	Worse than -5%	3.0% or less	$15,000/year

The difference between a 4% and 3.5% withdrawal rate on a $500,000 portfolio is $2,500 per year. That sounds modest, but modeling it forward, that adjustment can add five to seven additional years of portfolio life. When you’re 72, those extra years matter enormously.

Step 3: Attack Healthcare Costs Strategically

Healthcare is the single biggest budget-buster for retirees depleting savings prematurely. The average retiree now pays over $7,000 per year in combined Medicare Part B premiums, Medigap or Medicare Advantage premiums, Part D drug costs, and out-of-pocket expenses. Fidelity’s 2024 Retiree Health Care Cost Estimate puts the lifetime healthcare cost for a 65-year-old couple at $351,000.

I often tell my clients that Medicare enrollment decisions are among the most consequential financial choices they’ll make in retirement. Here’s where to look for savings:

Medicare Optimization Checklist

• Review your plan annually during Open Enrollment (October 15–December 7). Drug formularies and provider networks change every year. A plan that saved you money last year may cost you more this year. Use the Medicare Plan Finder tool to compare options side by side.
• Consider Medicare Advantage vs. Original Medicare + Medigap. If you’re healthy and rarely see specialists, a $0-premium Medicare Advantage plan may work. If you have chronic conditions or travel frequently, Original Medicare with a Medigap supplement often provides more predictable costs.
• Apply for Extra Help / Low-Income Subsidy (LIS). If your income is below $22,590 (individual) or $30,660 (couple) in 2025, you may qualify for assistance that can cut Part D premiums, deductibles, and copays to near zero. Many eligible retirees don’t apply because they don’t realize they qualify.
• Use IRMAA planning to avoid surcharges. If your Modified Adjusted Gross Income exceeds $106,000 (single) or $212,000 (married filing jointly), you’ll pay Income-Related Monthly Adjustment Amount (IRMAA) surcharges on Parts B and D. Strategic Roth conversions and income timing can help you stay below these thresholds.

Step 4: Optimize Your Social Security Strategy

According to the Social Security Administration, the average monthly retirement benefit in 2025 is approximately $1,976. After Medicare Part B premiums are deducted, many retirees take home closer to $1,800 or less.

If you haven’t claimed yet, or if you’re advising a spouse who hasn’t, the claiming age decision is one of the highest-impact financial moves available. Delaying benefits from age 62 to 70 increases your monthly check by roughly 77%. For someone with a full retirement age benefit of $2,000, that’s the difference between receiving $1,400/month at 62 versus $2,480/month at 70.

When Delaying Makes the Most Sense

• You’re in good health and have family longevity on your side.
• You have other income sources (pension, part-time work, IRA withdrawals) to bridge the gap.
• You’re the higher earner in a married couple—your benefit becomes the survivor benefit.

When Claiming Earlier Could Be Smart

• You have significant health concerns that may shorten your life expectancy.
• You have no other income and would otherwise need to take large, taxable IRA withdrawals.
• You’re forced into early retirement and need the cash flow.

There’s no universal right answer. But I can tell you that in my 18 years of experience, the retirees who regret their claiming decision most are those who claimed early without running the numbers first.

Step 5: Execute a Tax-Smart Withdrawal Sequence

Most retirees have money in three types of accounts: tax-deferred (traditional IRA, 401(k)), tax-free (Roth IRA), and taxable (brokerage, savings). The order in which you draw from these accounts can save or cost you tens of thousands of dollars over your retirement.

The conventional wisdom says draw from taxable accounts first, then tax-deferred, then Roth. But I find this approach is often wrong for retirees in the 60–72 age window.

The Roth Conversion Window

If you retire before age 73 (when Required Minimum Distributions kick in under the SECURE 2.0 Act), you may have several years where your taxable income is unusually low. This is the golden window for Roth conversions.

By converting portions of your traditional IRA to a Roth each year—filling up the 12% or 22% tax bracket—you can reduce future RMDs, lower future Medicare IRMAA surcharges, and create a pool of tax-free income. I’ve seen clients save $40,000–$80,000 in lifetime taxes with a well-executed Roth conversion strategy. A qualified tax professional or CFP® can model this for your specific situation. The IRS website has current tax bracket information to help you estimate the math.

Step 6: Build a Proper Income Floor

One pattern I see repeatedly among retirees depleting savings too fast: they’re invested too aggressively for their withdrawal needs, and a market downturn forces them to sell assets at a loss to cover living expenses. This is called sequence-of-returns risk, and it’s the silent killer of retirement portfolios.

The fix is what I call an “income floor”—guaranteed income sources that cover your non-negotiable expenses (housing, food, insurance, utilities, medications) regardless of what the stock market does.

Building Your Floor

1. Calculate your essential monthly expenses. For most of my clients, this falls between $2,500 and $4,500/month.
2. Add up your guaranteed income sources: Social Security, pension, annuity payments.
3. Identify any gap. If essentials are $3,800/month and Social Security covers $2,000, you have an $1,800/month gap.
4. Consider filling the gap with a Single Premium Immediate Annuity (SPIA) or Treasury bonds/TIPS ladder. A 70-year-old can currently get roughly $700–$750/month from a $100,000 SPIA, depending on the provider.
5. Keep 12–24 months of expenses in a high-yield savings account or money market fund (currently yielding 4.0–4.5%) as a cash buffer so you never have to sell stocks in a downturn.

With your essential expenses covered by guaranteed income, the rest of your portfolio can remain invested for growth without the pressure of forced selling. According to Investopedia’s analysis, retirees who maintain a proper income floor are significantly less likely to outlive their savings.

Step 7: Cut the Hidden Costs That Compound Over Time

Some of the biggest drains on retirement savings aren’t dramatic—they’re small, recurring costs that compound over years. Here are the ones I flag most often with my clients:

• Investment fees: If you’re paying 1.0–1.5% in fund expense ratios or advisor fees, you could be losing $5,000–$7,500/year on a $500,000 portfolio. Index funds with expense ratios of 0.03–0.10% exist, and fee-only advisors typically charge less than commission-based ones.
• Unnecessary insurance: Whole life policies with high premiums that you no longer need, overlapping auto coverage, or credit monitoring services you’re paying for but could get free—audit every policy annually.
• Housing costs that no longer fit: If you’re maintaining a four-bedroom home for two people, property taxes, maintenance, and utilities may be consuming 40%+ of your income. Downsizing isn’t right for everyone, but if you plan to age in place, targeted home modifications are far cheaper than maintaining excess space.
• Scams and fraud: The FBI reported that Americans over 60 lost $3.4 billion to fraud in 2023—a 11% increase from 2022. Protecting your money means understanding how modern scams work and putting safeguards in place.

Step 8: Schedule a Quarterly Financial Check-In

The most dangerous thing a retiree can do is create a financial plan and then put it in a drawer. Markets shift. Tax laws change. Healthcare needs evolve. Social Security COLAs fluctuate. Your plan needs to be a living document.

I recommend quarterly check-ins—30 to 45 minutes, either with a financial advisor or on your own using a structured checklist.

Quarterly Review Checklist

1. Review your portfolio balance and compare it to your projection. Are you on track?
2. Check your withdrawal rate. Has it crept above your target?
3. Review any upcoming large expenses (dental work, home repairs, travel) and plan funding sources.
4. Verify that your cash buffer (12–24 months) is still intact.
5. Check for any tax-planning opportunities—Roth conversions, tax-loss harvesting, charitable giving strategies.
6. Review your beneficiary designations. These override your will, and outdated designations are one of the most common estate planning mistakes I see.
7. Assess your health insurance. If anything has changed with your medications or providers, note it for the next Medicare Open Enrollment.

Put these dates on your calendar right now: the first week of January, April, July, and October. Treat them like doctor’s appointments—non-negotiable.

The Bigger Picture: This Is Manageable

I know the headlines are alarming. “Retirees depleting savings” makes for dramatic news, and yes, the macro trends are real. Inflation has been punishing. Healthcare costs continue to outpace general inflation by 2–3x. Social Security’s long-term funding challenges aren’t resolved.

But here’s what I want you to take away from this guide: the retirees I work with who follow a structured, proactive approach to their finances are not the ones running out of money. The ones who get into trouble are the ones who avoid looking at the numbers, who don’t adjust when conditions change, and who let inertia drive their financial decisions.

You don’t need a perfect plan. You need a good plan that you actually follow—and update. If you’re reading this article, you’re already ahead of most people because you’re paying attention.

Start with Step 1 today. Pull those statements. Face the numbers. Then work through the rest of this list at your own pace. And if you need help, look for a fee-only CFP® through the National Association of Personal Financial Advisors (NAPFA) or the Garrett Planning Network—both specialize in advisors who work in your interest, not on commission.

Your retirement savings aren’t just numbers on a screen. They represent decades of work, discipline, and sacrifice. They deserve your attention—and a strategy worthy of the effort it took to build them. For a broader overview of the financial landscape heading into next year, these six must-know moves for 2026 are worth reviewing alongside this guide.