Retirees Outliving Savings: How to Close the $109K Gap

The $109,000 Problem Nobody Warned You About

Here’s a number that should stop every American over 50 in their tracks: $109,000. That’s the average gap between what retirees have saved and what they’ll actually need to cover expenses through the end of their lives, according to a 2025 study by the National Council on Aging and the LeadingAge LTSS Center. The research found that seniors in 41 states and Washington, D.C. are at risk of outliving their retirement savings entirely.

In my 15 years working in consumer finance—including my time at the CFPB analyzing how older Americans interact with financial products—I’ve watched this crisis build in slow motion. What I see most often is not reckless spending or poor planning. It’s a quiet erosion: inflation chipping away at purchasing power, healthcare costs climbing faster than income, and people simply living longer than their money was designed to last.

The good news? The retirement savings gap is not a fixed sentence. Whether you’re 52 and still working or 72 and already drawing down, there are specific, proven strategies to close it. This guide walks you through the most impactful ones, step by step.

Why the Retirement Savings Gap Is Growing So Fast

Before we fix the problem, we need to understand what’s driving it. Three forces are converging to drain retirement accounts faster than any generation before us has experienced.

Inflation That Won’t Quit

Even as headline inflation has cooled from its 2022 peak of 9.1%, the cumulative damage is staggering. Grocery prices are up roughly 25% compared to 2020 levels. Housing costs, including property taxes and insurance, have surged in most markets. For retirees on fixed incomes, these aren’t temporary inconveniences—they’re permanent reductions in buying power.

A recent survey by the Employee Benefit Research Institute found that older adults are depleting retirement savings earlier than expected, with inflation cited as the primary culprit. If you’re feeling this squeeze, you’re far from alone. For a deeper look at this trend, read our analysis on why retirees are depleting savings faster.

Healthcare: The Expense That Keeps Compounding

Fidelity estimates that a 65-year-old couple retiring in 2025 will need approximately $365,000 to cover healthcare costs in retirement—and that doesn’t include long-term care. Medicare Part B premiums have risen from $148.50 per month in 2021 to $185.00 in 2025. Prescription drug costs, dental work, and vision care (none fully covered by Original Medicare) add thousands more annually.

I often tell readers that healthcare is the single most underestimated line item in every retirement budget I’ve ever reviewed. People plan for housing. They plan for food. But they routinely underestimate what they’ll spend on their own bodies by 40% to 60%.

Longer Lives, Shorter Runways

According to the Social Security Administration, a man reaching age 65 today can expect to live on average until 84. A woman, until 86.5. One in three 65-year-olds will live past 90. That’s wonderful news for your grandchildren—and terrifying news for your portfolio. A retirement that lasts 30 years requires fundamentally different planning than one designed for 20.

Step One: Know Your Actual Number

The $109,000 gap is a national average. Your personal gap could be larger or smaller, and you can’t close it until you know what it is. Here’s how to calculate it.

Map Your Guaranteed Income

Start by adding up every source of income you can count on regardless of market conditions:

• Social Security benefits — Log into your My Social Security account at ssa.gov to see your projected monthly benefit at ages 62, 67, and 70.
• Pension income — If you have a defined-benefit pension, confirm the monthly payout and whether it includes a cost-of-living adjustment.
• Annuity payments — Include any annuities already in payout phase.

Map Your Actual Expenses

Forget generic budgeting templates. Pull three months of bank and credit card statements and categorize every dollar. Pay special attention to:

• Medicare premiums, Medigap or Medicare Advantage costs, and out-of-pocket medical expenses
• Property taxes, homeowner’s insurance, and maintenance (these rise regardless of whether your mortgage is paid off)
• Prescription medications, including what you pay after Medicare Part D coverage
• Food, transportation, and utilities at current inflated prices

Multiply your monthly expenses by 12, then multiply that annual figure by the number of years between now and age 90. Compare that total to your combined guaranteed income plus current savings. The difference is your personal retirement savings gap.

Step Two: Maximize Your Social Security Strategy

Social Security is the single largest source of retirement income for most Americans, replacing about 40% of pre-retirement earnings for average earners. Yet the majority of people claim benefits at the wrong time, leaving tens of thousands of dollars on the table.

The Power of Delayed Claiming

For every year you delay claiming Social Security past your full retirement age (67 for those born in 1960 or later), your benefit increases by 8%. That means waiting from 67 to 70 results in a 24% permanently higher monthly check. For someone with a full retirement age benefit of $2,000 per month, that’s the difference between $2,000 and $2,480—an extra $5,760 per year for life.

The 2027 Social Security COLA is currently projected at around 2.2% to 2.6%, down from 3.2% in 2025. While any cost-of-living adjustment helps, these incremental raises can’t compensate for a claiming decision that locks in a permanently reduced benefit. For the latest on what to expect, see our breakdown of the 2027 Social Security COLA projection.

Spousal and Survivor Strategies

If you’re married, coordinating claiming strategies between spouses can add significant lifetime income. In many cases, having the higher earner delay until 70 while the lower earner claims earlier creates an optimal income stream—especially since the surviving spouse will receive the higher of the two benefits.

Step Three: Plug the Healthcare Drain

Healthcare costs are the fastest-growing expense in retirement, but there are concrete ways to reduce them without sacrificing quality of care.

Review Your Medicare Coverage Annually

Every year during Open Enrollment (October 15 through December 7), you can switch between Original Medicare and Medicare Advantage, change Part D drug plans, or add or drop Medigap coverage. The Medicare Plan Finder tool lets you compare plans based on your specific prescriptions and preferred providers.

I’ve seen retirees save $1,200 to $3,000 per year simply by switching Part D plans when their medication formulary changes. It takes about 30 minutes, and it’s one of the highest-return activities you can do each fall.

Consider a Medicare Advantage Plan Carefully

Medicare Advantage enrollment has surged past 33 million in 2025, covering more than half of all Medicare beneficiaries. These plans often include dental, vision, and hearing benefits that Original Medicare doesn’t cover. However, they come with network restrictions and prior authorization requirements that can limit your options.

If you’re healthy and travel frequently, Original Medicare with a Medigap supplement may give you more flexibility. If you need comprehensive coverage and stay close to home, a well-rated Medicare Advantage plan could save you money. There’s no universal right answer—only the right answer for your situation.

Step Four: Make Your Money Work Harder Without Taking On Excessive Risk

One of the most damaging myths in retirement planning is that you should move everything to cash and bonds the day you stop working. With retirements lasting 25 to 30 years, an overly conservative portfolio can actually increase the risk of running out of money because your returns won’t keep pace with inflation.

The Bucket Strategy

A method I frequently recommend is the “bucket” approach:

• Bucket 1 (Years 1–3): Cash and short-term CDs covering two to three years of living expenses. This is your safety net so you never have to sell investments during a downturn.
• Bucket 2 (Years 4–10): High-quality bonds, Treasury I Bonds, and dividend-paying stocks. This provides moderate growth with limited volatility.
• Bucket 3 (Years 10+): A diversified mix of equities, including broad-market index funds. This portion has time to recover from downturns and provides the growth needed to outpace inflation over decades.

For specific investment ideas suited to retirees, our guide on high-return, low-risk investments for retirees in 2026 covers options ranging from Treasury securities to dividend aristocrats.

Watch Your Withdrawal Rate

The traditional “4% rule” suggests withdrawing 4% of your portfolio in year one and adjusting for inflation each year after. However, recent research from Investopedia and Morningstar suggests a more flexible approach: withdrawing 3.5% to 4% in good market years and pulling back to 3% or less during downturns. This dynamic withdrawal strategy can extend the life of a portfolio by five to seven years.

Step Five: Cut the Expenses That Matter Most

Small expense cuts feel good but rarely move the needle. The three categories that actually determine whether you close your retirement savings gap are housing, healthcare, and taxes.

Housing: Your Biggest Lever

If your home equity represents the majority of your net worth—as it does for roughly 60% of retirees—you have options beyond simply staying put and hoping for the best. Downsizing to a smaller home or relocating to a lower-cost state can free up $100,000 or more in equity while simultaneously reducing property taxes, insurance, and maintenance costs.

If you prefer to stay in your home, explore whether a Home Equity Conversion Mortgage (reverse mortgage) makes sense for your situation. The CFPB offers free counseling resources specifically designed to help seniors evaluate this option without sales pressure.

Taxes: Don’t Overpay in Retirement

Many retirees don’t realize that strategic Roth conversions during lower-income years can reduce their lifetime tax burden significantly. By converting traditional IRA funds to a Roth IRA before Required Minimum Distributions kick in at age 73, you pay taxes now at a potentially lower rate and enjoy tax-free withdrawals later.

Additionally, retirees in the nine states that still tax Social Security benefits should evaluate whether relocating could save them thousands annually. Check with a tax professional or use the IRS free file resources to model different scenarios.

Step Six: Build a Buffer Against the Unexpected

The $109,000 gap assumes a relatively smooth ride through retirement. Reality rarely cooperates. A long-term care need, a major home repair, or a financial scam can blow through even well-built plans in months.

• Long-term care insurance: If you’re between 50 and 65, hybrid life insurance/long-term care policies offer coverage without the “use it or lose it” problem of traditional LTC insurance.
• Emergency reserves: Maintain at least six months of expenses in a high-yield savings account, separate from your investment portfolio.
• Fraud protection: Financial exploitation costs older Americans an estimated $28.3 billion annually. Learn how to recognize and prevent scams with our guide on how to avoid financial scams targeting older adults.

The Bottom Line: The Gap Is Real, But So Are the Solutions

A $109,000 retirement savings gap sounds overwhelming, and I won’t pretend otherwise. But here’s what my years in consumer finance have taught me: the people who face the worst outcomes aren’t the ones with the smallest accounts. They’re the ones who never look at the numbers at all.

By calculating your personal gap, optimizing Social Security timing, actively managing healthcare costs, maintaining a growth-oriented investment strategy, and addressing housing and tax inefficiencies, you can realistically close much—or all—of that shortfall. None of these steps requires a finance degree. They require attention, a willingness to make some uncomfortable decisions, and the understanding that doing nothing is the most expensive choice of all.

If you’re feeling the broader pressure of rising costs eroding your financial security, you’re not imagining it. Explore our practical strategies in 7 ways to stop inflation from draining your retirement savings for additional steps you can take this month.

Start with one step today. Pull up your Social Security statement. Review your Medicare plan. Run the numbers on your withdrawal rate. Every single action you take closes the gap a little more—and in retirement, every dollar you save buys you time. And time, ultimately, is what this is all about.