Will My Money Run Out? 4 Levels of Misfortune

Scary Questions Series: Will My Money Run Out Before I Die?

See How Your Money Holds Up Against 4 Escalating Levels of Misfortune

No matter how much you have, it’s possible to lose it all. We’ve all seen it happen on the celebrity stage. But it happens off the stage just as often. How many lottery winners end up in worse financial shape than before they won?



7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning


The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

Extreme examples of course, but the seemingly simple question remains: How can you know if your money will run out before you reach the end of life?

Perhaps the reason we ask this question is because it’s not so simple.

Complicating Questions

To determine if it’s possible to know if your money will run out, you have to look at your entire financial picture and life situation. Some of the big questions to answer:

How much do I have now?

Whether you have $2,000,000, $8 million, $50 million, or $5 billion, that’s the starting point to knowing when you’ll run out.

How much am I spending?

Debt payments, simple expenses, and splurges all go here. You may be spending $20,000 per month right now, but how much wiggle room do you have? Maybe, once you have a clear picture in place, you’ll discover you could actually be spending $40,000 per month and still have no concerns about running out of money.

But discovering that information depends on much more than you can learn from the projected investment performance of your portfolio (which by the way, you will NOT find on this list – see why outperforming the market is the wrong goal and the wrong question). [link to Blog 1]

How long will I live?

Okay, obviously no one knows the answer to this. But you do have some related questions you can ask yourself, such as:

  • What’s my family history? Is there an age range most people seem to make it to?
  • What is my personal medical situation?
  • What are my close family members’ medical situations?
  • Are my parents still living?

Take those questions together and give yourself (and your parents) a fair estimation. Then maybe add five or ten years to it.

What are my known upcoming big expenses and planned large purchases?

These vary as much as there are people on the planet. But these are known and planned, so you should know what yours are. What large amounts are you planning and expecting to spend? How much of this spending is flexible and how much is required?

What are my unknown upcoming big expenses and unplanned large purchases?

Donald Rumsfeld once famously quipped about known knowns, unknown knowns, known unknowns, and unknown unknowns. He was discussing the Iraq situation. But it’s not a bad paradigm for your financial future either.

This question falls into the ‘known unknowns’ category. You know there will be unplanned expenses that will cause you distress. You just don’t know what they’ll be or if you can prevent or avoid them.

There are ways to plan for these, at least in part. With an experienced financial advisor who has a proven system that also answers the main question at hand – will my money run out? – you can also anticipate these sometimes life-reordering known unknowns.

What’s the market doing?

All things being normal, the market goes up over time. Sometimes more, sometimes less. So as long as your money is being invested in a healthy asset allocation by an experienced financial advisor, your money should grow, apart from what you’re taking out as income once you’re retired, that is.

But projecting your money’s future based on the market alone is, as hinted before, not possible because of all these other questions. But this question is here because you’ll have to continually ask it. If we have a ‘lost decade’ again like in the 2000s, but it happens during your 70s, you’ll need to pay close attention to your finances to keep from falling behind and potentially running out of money.

What’s happening in the world that’s outside my control?

Wars, economic stagflation, political upheaval, international chaos, a business-destroying regulation that affects your business in serious ways – the number of possible events that can cause global or localized economic distress is extensive. These are unknown unknowns. We have no idea how the world will look in 20 years.

The best plan in the world that doesn’t account for these possibilities isn’t an adequate plan, and leaves you still without answers to today’s fundamental question – will my money run out before I die?

How to Know with Confidence Your Money Will Not Run Out

All the preceding questions affect your finances. Some of them can be answered. Some cannot. But to know if your money will run out or not, you need two things:

1) A plan that measures the health of your portfolio against as many scenarios as possible

2) A process for continually updating that plan

Let’s look at why both these things matter.

The Plan

You need a way to project your portfolio’s future against the most extreme, terrible, and disastrous economic catastrophes imaginable.

We call these ‘stress tests.’

Like two recessions back to back. Like a recession plus a terrorist attack. Like a war plus a pestilence that destroys the wheat harvest. Things that have never happened in combination. Things that have happened in part, but rarely. And things that have actually happened, like the Great Recession, that allowed us to see how they affected the economy and investment performance.

Suppose you had 1000 such scenarios, and had a mathematical system for determining how your portfolio holds up in each of them. What you’d need to do is use that system to find out how much money you have left after various possible lifespans in each scenario, and you’ll know if it will run out or not.

If you discover that your money will not run out in 750-900 of those scenarios (what we call the “Comfort Zone”), you are halfway to relaxing in the peace of mind that your money will never run out before you die.


Because remember, most of these scenarios are very unlikely to happen. So if your money can be shown to last through the remainder of your life even in those extreme scenarios, you can be confident it will not run out.

However, if your portfolio only makes it through intact in, say 600 of these scenarios, you’ll know you need to make some adjustments to your lifestyle to ensure your money doesn’t run out. In our system, your portfolio must pass between 75-90% of the 1000 scenarios.

Make sense? Okay – you’re halfway there.

Ongoing Updates

Here’s the reality check. Life happens. Whatever your plan is, it will fail. This is one of the few things we guarantee. What do we mean?

Suppose you create a plan at age 50. It has financial goals, investment strategies, allocation plans, and it’s based on your life goals and the current economic situation – at that time.

By age 60, almost none of those components will still be accurate or true to your situation. A financial plan is not something you can just set and forget. The only way to be continually confident that your money won’t run out is to continually update your plan.

We update plans every quarter for all our clients for this reason. There is no other way to do it if you want to consistently be as confident as possible that your money won’t run out.

You need two things: A well-conceived stress-tested plan, and a system for updating it every quarter.

It is complex, we know. But so is the question. Here’s another way to look at it.

4 Levels of Confidence to Predict If Your Money Will Run Out

If the previous description was a little too mathematical for you, or perhaps a little too apocalyptic, here’s another way to assess your portfolio’s health for the long term.

Level 1: The Sunny Ocean – Life Continues Normally

There will be minor hiccups, some unexpected events that cost you, and some waves of frustration, but nothing outside of what most people experience as a normal part of life.

In this level, nothing disastrous happens to cause even the most conservative projections about your money to be called into question.

As long as you’re investing your money smartly with the help of an experienced advisor, you’ll have nothing to worry about, and your money will not run out. You’ll accomplish all your life goals and dreams, leave money to your heirs, and leave the legacy you’ve been working toward.

Just about any financial advisor can deliver a winning result at this level.

Level 2: The Hurricane – Your Life Takes a Costly Turn, Economy/World Remain Stable

At this level, you experience great personal hardship of some sort that causes all your finances to require a new approach. Could be an early death of a spouse, or a chronic disease diagnosis of something like Alzheimer’s. Legal troubles, business troubles – again, many possibilities exist.

But what enables you to get through this personal trial is that the overall economy remains pretty stable. For most people, the ocean is still sunny. But you’ve been victimized by a major storm, and it has cost you plenty. Once you pull your life together again, you’ll be able to build your finances back up and participate in a still-functioning society.

Here, not as many financial advisors will be able to steer your money unscathed so you can be sure to not run out. Such a positive outcome requires a flexible and adjustable plan that gets updated continually, not something that was created once and then put in a drawer and set on autopilot.

This is not the job for a robo-advisor.

Level 3: Global Climate Change – Economy/World Falls Into Calamity, You Remain Stable

In this level, the world experiences a major economic crisis. Recessions hit multiple countries and markets. Perhaps wars, or famines, or disease outbreaks, or soured international relations get worse, and the economy and global markets suffer.

Or, maybe all it takes is another housing and banking crisis caused by foolish people.

Whatever the cause, Level 3 involves things outside your control that nevertheless affect your finances and portfolio in life-changing ways. You’ll probably lose value for a time, and it may be years before you recover, which happened for many in 2008.

But, you remain healthy. Your income continues. Your family is stable. Nothing disastrous happens to you personally, so once you weather this international crisis, you’ll get back on track and be fine. But you do have to weather the crisis first, and you need to update your plan to adjust to the changing times.

Here again, even fewer financial advisors can effectively steer you through this and still be able to assure you – all along the way no matter how bad the situation gets – that your money will not run out.

Too many advisors invest in overly aggressive asset allocations or use active management approaches. Those sorts of tactics can decimate your portfolio during a Level 3 crisis, and you might never recover. We’ve had people come to us from other advisors who’ve had to go back to work, after retiring, in situations like this. We saw it in 2000, and we saw it again in 2008.

To survive Level 3 crises, you need a smart and experienced advisor who uses a planning approach that adapts quickly to changing circumstances.

Level 4: Murphy’s Law Strikes – Economy Implodes AND Your Life Takes Costly Turn

At this worst level, Level 2 gets combined with Level 3. The global economy suffers a major setback, and something terrible happens in your life around the same time. Murphy’s Law states that whatever can go wrong, goes wrong. That’s Level 4.

Now, you’re losing money because of an economic meltdown that will take years to recover from, and you’re suffering personal challenges that will make it even harder to stay afloat.

At this level, only the most proactive wealth advisor, with a fluid and adjustable plan that can re-evaluate and re-calculate your portfolio’s health based on completely adjustable goals, can help you through such a terrible time.

If you liked the 75-90% Comfort Zone idea from before, this kind of advisor will help you adjust your finances and your plan – even in this perfect storm of terrible economic and life crises – to help you continue to confidently remain within that range. Even in the worst of times, he will be able to help you feel peace of mind that your money will not run out.

You Can Know – With Confidence – That Your Money Will Not Run Out

You can be confident that your money will not run out before you die.

But the only way is to work with an advisor who can do two things:

1) Mathematically project how well your portfolio will hold up against 1000 different stress test scenarios that incorporate your life goals and financial situation
2) Update that plan quarterly as your situation, the economy, and the rest of the world keep changing

Answering the questions at the start of this post is just the beginning. The only way to know if your money will run out before you die is with a system that takes those answers, and measures how well they stand against the worst that life can throw at you. Even a Level 4 crisis.

Pillar Wealth Management is such an advisor.

If you’d like to learn more about how we deliver this level of confidence, let’s start a conversation.