Even if you are fortunate enough to be able to fully retire, there will be financial challenges to deal with.
One of the most worrying is whether you’ll have enough money to maintain your lifestyle for the years to come.
In this sense, retirement can be enormously stressful, says personal finance expert Warren Ingram (director at Galileo Capital).
“People who’re retired can watch their cost of living go straight through the roof. This is a tough question because they can’t go back to work, they’ve been retired for a reason, and so they find themselve trying to make their money stretch as far as they possible can without entirely compromising their quality of life.”
“I don’t think we fully realise how much stress retired people have with this whole situation until we get there ourselves…”
Warren Ingram, Director – Galileo Capital
Retirees often fall into the trap of either spending too little when they actually have sufficient funds, or spending too much without taking into account that they could still live for another two or three decades.
Ingram shares his strategies for making sure that your retirement savings cover you for your full lifetime.
5 TIPS TO MAKE YOUR RETIREMENT SAVINGS LAST LONGER
1. Withdraw Wisely: Determining a sustainable withdrawal rate is one of the most important factors in making your savings last. The commonly cited ‘4% rule’ suggests withdrawing no more than 4% of your total savings in the first year of retirement, then adjusting for inflation each subsequent year. This approach ensures your money lasts at least 20 to 30 years. However, the optimal withdrawal rate depends on your specific situation, including your expected retirement length, risk tolerance, and investment mix.
2. Invest for Growth: While a conservative portfolio may seem appealing for stability, history shows that a balanced allocation with significant equity exposure can allow for higher withdrawal rates over the long term. Aim for a mix of stocks, bonds, and cash that aligns with your risk profile and time horizon.
3. Reduce Expenses: Carefully review your spending and look for opportunities to trim discretionary expenses where necessary. Even small cuts like dining out, entertainment, and subscriptions can add up to meaningful savings over time. Prioritise needs over wants to extend your retirement funds.
4. Delay Retirement: Working a few extra years can significantly boost your savings and shorten the time you need your nest egg to last. This allows for additional contributions, investment growth, and a shorter retirement period. If possible, you could consider reducing hours or transitioning to a less demanding role.
5. Protect Against Longevity Risk: Guaranteed Annuities can provide a guaranteed income stream for life, shielding you from the risk of outliving your savings. Consider investing a portion of your nest egg in a guaranteed annuity, especially if you just have enough or have under-provisioned for retirement.