One of the most intimidating aspects of retirement is not knowing how long your savings will need to last. After all, in the absence of a crystal ball, it's impossible to know whether you'll live till your 80s, 90s, or possibly beyond.

With that in mind, you should know that according to the Social Security Administration, the average 65-year-old man today will live until age 84.3, while the average 65-year-old woman will live until 86.6. Furthermore, one in four 65-year-olds will live past the age of 90, while one in 10 will live past age 95.

Older man sitting on a bench


Based on these projections, for financial planning purposes, it's best to assume that you'll be looking at a 30-year retirement. And that assumption alone can help guide your withdrawal strategy to help ensure that you don't run out of savings.

How long will your savings last?

Countless older Americans worry incessantly about outliving their savings, so much so that in a recent Transamerica study, 43% of older workers consider it their single greatest financial fear. But if you go in prepared for a lengthy retirement and establish a smart withdrawal strategy, you'll be able to rest easy knowing that your savings have a strong chance of holding up.

Of course, your first year of retirement will inevitably set the stage for future financial decisions, so knowing how much to withdraw during that initial 12-month period is crucial. To arrive at that number, it helps to start with the 4% rule.

Often hailed as the be-all and end-all of withdrawal strategies, the 4% rule states that if you begin by withdrawing 4% of your nest egg's value during your first year of retirement and then adjust subsequent withdrawals for inflation, you can bank on your savings lasting 30 years. So if, for example, you kick off retirement with $1 million in savings, you can, according to the 4% rule, safely take out $40,000 in your first year without worry.

Now the 4% rule does have its share of flaws. For one, it assumes a reasonable mix of stocks and bonds, which not all portfolios have. It also assumes that interest rates will hold up reasonably in the face of inflation, but given that rates were much higher back when the rule was established, that's a dubious assumption.

Still, if there's one thing the 4% rule is good for, it's serving as a benchmark for withdrawal-related decisions. You may end up withdrawing more than 4% of your savings in your first year of retirement or you might manage to get away with less. But if you use the rule as a baseline and adjust it to meet your needs, you have a solid chance of making your savings last.

How will your financial needs evolve in retirement?

A big part of your initial retirement withdrawal strategy will inevitably boil down to the following question: Will you need more money during the early stages of retirement or later on?

There's a clear argument to be made for both. First of all, a growing number of seniors aren't managing to shake their mortgage debt in time for retirement. If you have five years of mortgage payments to contend with early on in retirement, it stands to reason that once your home is paid off, you'll need less money down the line. If that's the case, you might plan to withdraw from your savings at a higher rate during those first few years and then adjust your withdrawal rate downward to reflect your waning expenses.

On the flip side, your health is likely to get worse, not better, over time, and with that comes the potential for increasing medical bills. If that's the case, then you might plan to withdraw less aggressively during the early stages of retirement so you have more money available later in life.

Your best bet, therefore, is to evaluate your personal needs and potential expenses at various stages of retirement and see what type of strategy makes the most sense. If you need a little more cash early on in retirement to knock out that mortgage debt once and for all, you could start by withdrawing 5% or 6% of your savings and then work your way down to 4% or less over time. Similarly, you might decide to spend a little more money on travel or leisure at the start of retirement, knowing full well that you won't have the same energy level 10 years later.

No matter how much you ultimately withdraw each year in retirement, the key is to choose an amount that accurately reflects your costs and adjust it as your circumstances change. Also, keep in mind that once you retire, you're by no means limited to the income you get from your savings alone. You can always work part-time, start your own business, or find other creative ways to bring in more cash. While having a withdrawal strategy is a smart idea, knowing you have other options for generating income will take some of the pressure off your nest egg so that you can make the most of it.