5 things that may affect your savings in retirement

 

You may have retired, but you aren't out of the woods yet. Just as there are stumbling blocks to watch out for before you retire, there are also things to consider after you've stopped working.

Once you retire, you may feel like the hardest part of the process is over. That might be true to an extent, but it's important to stay active when it comes to managing your finances. These are some of the things that might trip you up after retirement.

1. Running out of money

It's possible to run out of money too early due to na´ve or irresponsible spending, but it isn't always because retirees aren't being careful. The fact is that humans worldwide are living longer, and that means that we need more money to last us. No one knows how long they have, but financially it's the safest to assume there's still a long way to go!

Check the table here from the Association for Savings and Investment South Africa (ASISA) to work out how long your retirement income will last you. If your money is dwindling and you're worried that you may be withdrawing too much, speak to your financial adviser on the next best steps.

2. Not taking care of your health

As we get older, we tend to spend much more on healthcare. Increasing costs for medical and social care can quickly erode savings, which in turn has a huge negative effect on individuals, families, their communities and the state.

According to the World Health Organization's Global Burden of Disease assessment, four chronic conditions (various cancers, chronic lung disease, diabetes and cardiovascular disease) contribute to 60% of deaths worldwide. These chronic conditions can be - if not prevented or treated - at least managed, by four lifestyle behaviours: good nutrition, enough physical activity, responsible tobacco use and responsible alcohol intake.

A lifestyle characterised by these healthy behaviours can save you hundreds of thousands in healthcare costs throughout your lifetime, and especially in retirement.

3. Underestimating the effects of inflation

Inflation refers to how much you can buy with the same amount of money over time. With the cost of living and the cost of healthcare always going up, it's important to make sure that inflation doesn't get the better of your retirement savings. There's nothing you can do about inflation itself, but there are things you can do to reduce its negative effect on your savings.

For example, you may need a more aggressive investing approach to outperform inflation and protect your money. Try to have a good portion of your savings invested in things like equities and listed property - over the long term, they generally outperform inflation by a good margin. If you want to move into safer investments, like cash and bonds, don't use all of your savings to do so.

If you're not sure about whether you've correctly diversified your investments or whether or not you can tolerate more risk, speak to a trusted professional.

4. Losing a spouse

This is something that's out of anyone's control, but it is inevitable. You need to be financially prepared to take on life without your spouse, so it's helpful to have a plan.

Aside from depression and the other health effects that can result from the loss of a spouse, you must also consider the day-to-day costs of living. According to the Society of Actuaries, the surviving spouse needs at least 75% of the couple's income to maintain the same standard of living.

One of the best things you can do as a couple, is to make sure that your wills are up to date. This is potentially already a big step in ensuring that your partner and family will be looked after if something happens to you. Check with a professional what tax implications may apply to your case, as the last thing anyone needs when grieving is admin and red tape.

5. Taking care of your family

It may be hard to admit, but the truth is that family responsibilities can severely hinder one's savings, and make it more difficult for people to move into a place of their own. In some cases, people who are still living in their parents' house have children of their own to take care of too. This phenomenon, known as the sandwich generation, is very prevalent in South Africa today.

Understandably, situations like this put soon-to-be retirees under huge pressure. You must try to make sure that your retirement money exists entirely independently of the money that you use for the benefit of those you love most. Setting boundaries and having honest conversations about money with your family may be difficult, but it is definitely worth it!

Being aware of these five scenarios and coming up with strategies to reduce or ease their effect will help you persevere. So, empower yourself today by planning for and addressing as many as you can! You can also find more tips here on ways to manage your money well.

This article is not financial advice. Please consult with a financial adviser for financial advice.

A living annuity that gives you more income in retirement

Our Living Annuity is designed to give you a regular income throughout your retirement and at the same time reward you with up to 50% extra retirement income each month for life, for withdrawing wisely and engaging with Vitality.

Find out more

See how our Living Annuity is rewarding clients

One of our clients shared her story on how our Living Annuity rewards her healthy investment and lifestyle behaviour.

Listen to what clients say about our Living Annuity

This document is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser. Discovery Life Investment Services Pty (Ltd): Registration number 2007/005969/07, branded as Discovery Invest, is an authorised financial services provider. All life assurance products are underwritten by Discovery Life Ltd. Registration number: 1966/003901/06, a licensed life Insurer,an authorised financial service provider and registered credit provider, NCR Reg No. NCRCP3555. All boosts are offered through the insurer, Discovery Life Limited. The insurer reserves the right to review and change the qualifying requirements for boosts at any time. Product Rules, Terms and Conditions Apply

Invest today!

Speak to your financial adviser. If you do not have a financial adviser, leave your details below, and we will get one to contact you.

Log in

Please click here to login into Discovery Digital Id

Please click here to login into Discovery Digital Id