It’s the million-dollar question—simple to ask, complicated to answer.
The starting point is understanding how much you spend each year. For a back-of-the-napkin estimate, take your gross pay, subtract taxes (from your tax return), and then subtract any savings—whether to IRAs, 401(k)s, or investment accounts. You can assume you spend the rest. Tracking exactly where it goes is another challenge altogether.
Don’t assume you’ll spend less during retirement. Many retirees spend more once they have time for traveling, taking up new hobbies, or simply going out to dinner and a movie. Starting with your current spending provides a realistic baseline.
From there, we recommend applying the Henssler Ten Year Rule. Any money you’ll need for living expenses within the next 10 years should be set aside in fixed-income investments that mature when you need them.
For example, if you spend $75,000 a year and receive $22,500 from Social Security, you’ll need to withdraw $52,500 from savings each year. If you plan to retire in 10 years, you should have $52,500 in fixed investments maturing in 2035. Next year, move funds into fixed investments maturing in 2036, and so on. By the time you retire, you’ll have 10 years of spending needs secured in fixed income.
You’ll continue this process throughout retirement. If the market experiences a downturn, you can rely on your fixed-income “bucket,” avoiding the need to sell equities at a loss. You may dip to eight years of reserves, but once markets recover, you can rebuild back to 10 years of liquid assets. The goal is to minimize selling growth assets when they’re down while keeping the rest of your portfolio invested for long-term growth.
To determine if your money will last, you must project this process over your expected lifetime. Inflation, market performance, and personal events—such as illness, marriage, divorce, or major purchases—can all affect your spending. Market returns aren’t linear either; consider the years 2021 through 2023, when the market roughly gained 28%, lost 18%, and then rose 26%.
As financial advisers, we model these variables to estimate how long your assets will last. We also project a maximum sustainable spending amount, assuming depletion of assets when the youngest spouse reaches age 92. We recommend clients spend at least 15% less than that maximum to provide a buffer for the unexpected.
If projections show your assets running out before your life expectancy, you’ll know early, giving you time to adjust by saving more, working longer, or reducing expenses. Reviewing your plan every two years (annually at first) helps ensure it reflects your actual spending habits.
Ultimately, this process produces a plan customized to your life and circumstances—one that’s far more reliable than a blanket rule like “spend only 4% of your portfolio per year.”
If you have questions on how to begin shifting your asset allocation for retirement, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the October 11, 2025 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
