Retirement
Making your wealth last longer in retirement
October 27, 2026
Not everything in retirement is predictable, but many decisions are within your control. Vanguard’s Principles for Retirement Income outlines how your choices, such as managing debt and timing your withdrawals, can significantly extend how long your wealth lasts and help ensure your money goes where you want it to.
Tackle high-interest debt first
With income often less flexible in retirement, reducing debt can go a long way toward making your savings last. Retirees who feel dissatisfied with their retirement are nearly three times more likely to report feeling burdened by unmanageable debt compared with those who feel satisfied.
Retirement savers looking to pay down debt should start with high-interest obligations like credit cards and unsecured loans. Investments rarely earn returns higher than these interest rates, so paying off these obligations can free up cash in the present while increasing flexibility and wealth in the future. Once high-interest debts are paid, you can address moderate-interest obligations like car loans.
While we recommend paying off high-interest debt first because it is the most cost-effective approach, some retirement savers may wish to pay off the smallest balance debt first if it provides them with peace of mind.
Sequence your withdrawals strategically—and tax-efficiently
The order in which you tap your savings matters. Many retirees can reduce their lifetime tax burden by withdrawing from taxable accounts first, then from tax-deferred accounts like traditional IRAs and 401(k)s, and leaving Roth accounts for last. This approach takes advantage of the fact that long-term capital gains rates are often lower than income tax rates early in retirement while income tax on traditional accounts are being deferred.1 In one hypothetical scenario, following this tax-efficient sequence reduced cumulative taxes paid by age 100 by about 14%.
The best withdrawal sequence for you can vary based on your current and expected future tax situation, required minimum distributions (RMDs), and estate planning goals, so consider speaking with an advisor if picking the right approach feels complex.
Time Roth conversions carefully
The years between retiring and when you need to begin taking RMDs from your retirement accounts—age 73 or age 75 for those born in 1960 or later—are often some of the lowest-income years of your retirement. That may put you in a lower tax bracket, which is an ideal time for Roth conversions, in which you pay income tax now to secure tax-free growth later. Vanguard research has found that more than 80% of investors can benefit meaningfully from including Roth conversions in their retirement income plan.2
By gradually converting assets to Roth IRAs during lower-income years, you can:
- Smooth out your tax bill;
- Reduce future RMDs that might push you into a higher tax bracket; and
- Help a surviving spouse avoid steeper single-filer tax rates.
Roth assets can also be passed on to heirs free of income tax, as long as the account has been open for five years.
A Roth conversion strategy can help reduce lifetime tax payments and increase wealth
a. Cumulative tax payments with and without a Roth conversion strategy
b. After-tax wealth with and without a Roth conversion strategy
Notes: The figures assume a 62-year-old female investor with $1,500,000 in a traditional IRA and $500,000 in a taxable account, invested in a static allocation of 50% equities (60% U.S. and 40% international) and 50% bonds (70% U.S. and 30% international). The investor retires and claims Social Security at full retirement age (FRA), with an initial benefit amount of $1,900 per month; FRA is age 67 for those born in 1960 or later, and 66 years and 10 months for those born between 1955 and 1959. The investor has a static annual spending target of $65,000 in real terms. The strategy modeled includes threshold-based Roth conversions starting at age 62 and continuing until the long-term capital gains tax rate on taxable assets reaches 15%. Outcomes are generated using the Vanguard Financial Advice Model (VFAM), which incorporates long-term capital market and inflation projections from Vanguard Capital Markets Model ® (VCMM) simulations run on February 28, 2026. These results are hypothetical, do not reflect actual investment performance, and are not guarantees of future outcomes.
Source: Vanguard.
IMPORTANT: The projections and other information generated by the VCMM regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Distribution of return outcomes from the VCMM are derived from 10,000 simulations for each modeled asset class. Simulations are as of February 28, 2026. Results from the model will vary with each use and over time. For more information, please see the Notes section below.
Flex your spending with market conditions
Dynamic spending—adjusting how much you withdraw based on portfolio performance—can help you avoid selling during downturns and enjoy more during strong markets. Rather than taking the same amount every year, you might set guardrails such as boosting withdrawals by up to 5% when your portfolio performs well and trimming withdrawals by up to 2.5% when it underperforms. This approach can help preserve your savings when markets are weak and reduce the risk of needing to make steep spending cuts later in life. Setting guardrails in advance can keep adjustments manageable while helping to make your money last through changing conditions.
Dynamic spending can help avoid the need for steep spending cuts and preserve savings
a. Expected annual spending in retirement with and without dynamic spending
b. Expected wealth in retirement with and without dynamic spending
Notes: The analysis assumes a 67-year-old female retiree with $800,000 in a traditional 401(k) and $200,000 in a taxable account invested in a static allocation of 50% equities (60% U.S. and 40% international) and 50% bonds (70% U.S. and 30% international). The investor receives $21,080 in annual Social Security benefits. Her real annual spending target includes $50,000 in essential expenses and $15,000 in discretionary expenses. Without dynamic spending, the investor maintains a fixed real spending target adjusted only for inflation. With dynamic spending, the investor’s spending target adjusts based on historical portfolio performance, with annual increases capped at 5% and decreases capped at 2.5%. All results shown are in today’s dollars. Outcomes are generated using the VFAM, which incorporates long-term capital market and inflation projections from VCMM simulations run on February 28, 2026. These results are hypothetical, do not reflect actual investment performance, and are not guarantees of future outcomes.
Sources: Vanguard, using data from the Society of Actuaries.
Protect what you’ve built
Establishing a financial power of attorney (POA) while you’re fully able to make decisions can help ensure your wishes are protected if you experience cognitive decline or are unable to manage your financial affairs for another reason. Choose someone you trust to have access to and oversight of your finances, and consider which type of POA fits your situation:
- A durable power of attorney, which takes effect immediately.
- A springing power of attorney, which activates only when needed.
For estate planning, how much your heirs receive can be affected by proper account titling and beneficiary designations. Adding someone as a co-owner on your investment account might simplify the transfer but could eliminate the step-up in cost basis, leading to higher taxes if the co-owner sells. Federal estate taxes as of 2026 only apply above $15 million per person or $30 million per couple. If you’re near or over that threshold, estate tax planning will become a priority and may influence your approach to retirement income, gifting, and charitable strategies.
While not everything in retirement is within your control, managing debt, sequencing withdrawals, timing Roth conversions, flexing spending, and protecting assets can help put meaningful financial decisions in your hands. Together, they can help make your wealth last and give you greater confidence in how it’s managed during your life and after.
1 Neither Vanguard nor its financial advisors provide tax or legal advice. This information is general and educational in nature and should not be considered tax or legal advice. Any tax-related information discussed herein is based on tax laws, regulations, judicial opinions, and other guidance that are complex and subject to change. Additional tax rules not discussed herein may also be applicable to your situation. Vanguard makes no warranties with regard to such information or the results obtained by its use and disclaims any liability arising out of your use of, or any tax positions taken in reliance on, such information. We recommend you consult a tax or legal advisor about your individual situation.
2 Withdrawals from a Roth IRA are generally tax-free if you are over the age of 59½ and have held the account for at least five years; withdrawals of earnings taken prior to age 59½ or before five years have passed may be subject to ordinary income tax or a 10% federal penalty, or both. (A separate five-year period applies for each conversion and begins on the first day of the year in which the conversion contribution is made.)
Notes:
All investing is subject to risk, including possible loss of principal. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
IMPORTANT: The projections and other information generated by the Vanguard Capital Markets Model (VCMM) regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. VCMM results will vary with each use and over time.
The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More importantly, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based.
The Vanguard Capital Markets Model® is a proprietary financial simulation tool developed and maintained by Vanguard’s primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include U.S. and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, U.S. municipal bonds, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data from as early as 1960. Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over time. Forecasts represent the distribution of geometric returns over different time horizons. Results produced by the tool will vary with each use and over time.