Longer life expectancy and increasing inflation may deplete your retirement funds faster than you anticipate. This approach might offer a solution.

Essential Insights

• With Americans living longer than ever, typical retirement savings may not be sufficient to cover the entirety of retirement years.

• Adopting a "purpose-driven portfolio approach" and boosting savings to achieve returns 4% to 5% above inflation can help retirement accounts last longer.

Many Americans are now facing extended retirements and rising costs, which means their nest eggs may not stretch as far as they hope.

Not only are people enjoying longer lives, but some are also forced into retirement earlier than planned. Additionally, persistent inflation can further diminish retirement income, leaving retirees with less than anticipated.

According to a 2025 report from Dunham & Associates, a couple retiring for 50 years could spend as much as $2.7 million just on groceries. In 2022, Americans aged 55 to 64 had an average retirement account balance of $537,560.

Currently, the average American can expect to live to 77.5 years, with most retiring at age 62.

Salvatore Capizzi, executive vice president at Dunham, remarked, "Medical breakthroughs are paving the way for unprecedented longevity, but ongoing inflation threatens to erode purchasing power during these longer retirements."

Why Your Retirement Funds Might Fall Short

Traditionally, as retirement nears, investors are advised to shift their portfolios toward safer, fixed-income assets to minimize risk and secure steady income. However, Capizzi warns that this conventional strategy may actually jeopardize retirees’ financial well-being, as inflation steadily reduces their buying power.

Dunham’s research found that even with a modest 2% inflation rate, a conservative portfolio yielding 4%–5% net returns could be exhausted 10 to 20 years before the end of a 50-year retirement, potentially leaving retirees without funds in their later years.

Relying on Social Security may not be a safe bet either, as benefits could be reduced by 24% by 2034 unless lawmakers take action to bolster the program.

Longer lifespans are also prompting retirees and those nearing retirement to provide financial support to aging relatives. Many Gen Xers—those born between 1965 and 1980—are also helping family members financially, making it even harder to save for their own retirement.

How to Strengthen Your Portfolio

To keep pace with both inflation and increased longevity, workers should aim for investment returns that exceed inflation by at least 4% to 5%.

Rather than sticking with the traditional bucket strategy—which allocates assets based on when they’ll be needed—Dunham’s research recommends a "purpose-driven portfolio strategy." This method organizes assets into distinct categories: distribution, flex, healthcare, and legacy, potentially leading to a more resilient retirement plan.

“Retirement gaps should be addressed during the planning stage,” advises certified financial planner Kassi Fetters.