Should I Move Money Out of the Market Before Retirement?

Why running out of money is the #1 retirement fear

If you lie awake at night wondering whether your savings will hold out, you are not alone. Survey after survey finds that running out of money beats out the fear of death among retirees and near-retirees. That is not irrational — it reflects a real shift in how retirement works today.

A generation ago, most workers left their jobs with a pension — a monthly check that arrived no matter what the stock market did. Today, most people have to build that paycheck themselves out of a 401(k), an IRA, and whatever Social Security provides. That responsibility can feel overwhelming.

The good news: this problem is well-studied, and there are proven strategies for turning a pile of savings into dependable income. This guide walks you through each one in plain language.

How long does retirement money actually have to last?

This is a question most people underestimate. If you retire at 65, your money may need to last 25 to 30 years or more. The Social Security Administration reports that a 65-year-old woman today has roughly a 50% chance of living past age 87. A 65-year-old man has a similar chance of reaching 84.

If you are part of a couple, the odds of at least one of you living into your 90s are quite high. Planning for 30 years is not pessimism — it is prudence.

The practical implication: a withdrawal rate that looks comfortable at 65 may become strained by 80 when healthcare costs rise. Building in a margin — and sources of income you cannot outlive — is not a luxury. It is a necessity.

How much should I keep safe versus invested?

One of the most practical frameworks I have seen is often called the two-bucket approach. The idea is simple: split your money into two distinct pools with two distinct jobs.

The exact split depends on your expenses, your other income sources, and how much market swings bother you emotionally. There is no one-size-fits-all percentage. A personalized income review can help you find the right balance for your situation.

When should I take Social Security?

Social Security timing is one of the highest-stakes decisions in retirement planning, and most people make it without enough information.

The basic trade-off

You can start collecting as early as age 62 or delay as late as age 70. Each year you wait past your full retirement age (typically 66–67 for most people reading this), your monthly benefit grows by about 8%. That is a meaningful, government-backed increase.

Who might benefit from claiming early

• You have serious health concerns and do not expect to live into your late 70s
• You have no other income and genuinely need the money now
• Your spouse has a larger benefit and will delay to maximize the household amount

Who might benefit from waiting

• You are in good health and your family tends to be long-lived
• You want a larger inflation-adjusted income for the rest of your life
• You are concerned about running out of money in your 80s

Spousal and survivor benefits add another layer of complexity. The right decision for one person is often the wrong one for a couple. This is worth talking through carefully before you file.

What is a guaranteed income stream, and do I need one?

A guaranteed income stream is money that arrives every month no matter how long you live and no matter what financial markets are doing. Social Security is the most familiar example. A pension is another. Some people choose to create a third source using a personal financial strategy.

Why a guaranteed income foundation matters

Research consistently shows that retirees who cover their essential expenses with guaranteed income feel more confident, spend more freely on the things they enjoy, and experience less anxiety. The reason is simple: when the basics are covered, you do not have to panic when the market drops.

One option: annuities

An annuity is a contract with an insurance company in which you trade a lump sum of money for a stream of income payments. In the simplest form — called a single premium immediate annuity — you hand over a set amount and begin receiving monthly checks within 30 days.

There are many types of annuities with very different features, costs, and trade-offs. Some are appropriate for the situation described above; many others are not. The word "annuity" covers a wide range of products, and it is important to understand exactly what you are considering.

Questions worth asking yourself

• Do my guaranteed income sources (Social Security, pension) fully cover my essential monthly expenses?
• If the market dropped 30% tomorrow, would I still be able to sleep at night?
• Am I comfortable making investment decisions well into my 80s?

If any of those answers concern you, it may be worth exploring whether a guaranteed income layer belongs in your plan.

How do I protect against inflation in retirement?

Inflation is a slow leak in your retirement income. Even modest inflation compounds over a 25-year retirement. At 3% per year, prices roughly double in 24 years. Something that costs $50,000 a year today could cost nearly $100,000 a year by the time you are in your late 80s.

Practical inflation defenses

• Delay Social Security — your benefit includes annual cost-of-living adjustments (COLA) that grow with the size of your check
• Keep a growth component — some portion of your savings in diversified investments has historically outpaced inflation over long periods
• Plan for rising healthcare costs — medical inflation has run higher than general inflation for decades; build in extra cushion
• Re-evaluate your plan periodically — what made sense at 65 may need adjustment at 75

No single tool solves inflation perfectly. The answer is usually a combination: a guaranteed income base that adjusts with inflation, plus a portfolio component with long-term growth potential.

What are the most common retirement income mistakes?

I have seen many retirement plans over the years. The same mistakes come up again and again. Being aware of them puts you well ahead.

• Underestimating longevity. Planning only to 80 or 85 when you could easily live 15 years longer leaves you dangerously short.
• Claiming Social Security too early simply because you just turned 62 or because "I paid into it all my life." Timing matters enormously.
• Withdrawing too much too soon. Taking large distributions in the early years of retirement leaves less to compound for later years.
• Holding too little in growth assets. Being entirely in cash or bonds at 65 exposes you to inflation risk over a 25-year horizon.
• Ignoring taxes on withdrawals. Traditional IRA and 401(k) withdrawals are taxed as ordinary income. Sequencing your withdrawals well can preserve thousands of dollars.
• Making major financial decisions alone. Retirement income planning involves tax law, insurance, investment strategy, and Social Security rules simultaneously. It is genuinely complex.

Questions I hear most often

What should I do next?

The most valuable thing you can do right now is get a clear picture of where you stand. That means looking at all your income sources, your expenses, your account balances, and how long your money needs to last — together, in one place.

• List every source of income you expect in retirement: Social Security, pensions, part-time work, rental income, portfolio withdrawals
• Separate your expenses into "needs" (non-negotiable) and "wants" (discretionary) — then compare to your guaranteed income
• Check your Social Security estimate at ssa.gov and run your numbers at different claiming ages
• If there is a gap between your guaranteed income and your essential expenses, explore what options might close it