by Katlego Mei, CFP®

Making your retirement savings last longer is a concern for many retirees, especially in South Africa, where economic pressures can significantly impact financial stability. With careful planning and strategic management of your finances, you can enhance the longevity of your retirement savings. Here are several effective strategies to help you achieve this goal.

Understand Your Financial Needs

The first step in ensuring your retirement savings last is to understand your financial needs. Many retirees underestimate the amount they will need to maintain their lifestyle. Generally, it’s recommended that retirees aim for an income of about 70% to 90% of their pre-retirement income to sustain their standard of living.

Minimise Withdrawals from Retirement Savings (Pre-retirement)

One of the most critical aspects of preserving your retirement savings is to minimise withdrawals from your retirement capital, especially now that the two-pot system will allow us to access a portion of our retirement funds. Each withdrawal reduces the principal amount and diminishes future growth potential due to compounding interest.

Create a Sustainable Spending Plan

Transitioning into retirement often brings changes in spending habits. To maximise your savings:

• Track Your Spending: Keep detailed records of your expenses to identify areas where you can cut back.

• Reduce Unnecessary Costs: Evaluate subscriptions, memberships, and other recurring expenses. Cancel those that no longer serve you.

Invest Wisely

Continuing to invest your capital in a well-diversified portfolio will help ensure that your funds grow over time, even during retirement.

Diversification is Key

• Maintain a Balanced Portfolio: A diversified investment portfolio can help mitigate risks while maximizing potential returns. Consider a mix of equities, bonds, and other assets based on your risk tolerance and investment horizon.

• Consult a Financial Advisor: If you’re uncertain about how to allocate your investments or need help navigating market conditions, seek advice from a qualified financial advisor.

Explore Guaranteed Income Options

To provide peace of mind during retirement, consider options that offer guaranteed income streams:

• Living Annuities vs. Life Annuities: Understand the differences between these types of annuities. Living annuities allow for more flexibility in withdrawals based on investment performance, while life annuities provide guaranteed income for life. Purchasing a guaranteed annuity can ensure a steady income throughout retirement. This option can be particularly beneficial if you are concerned about outliving your savings when you just have enough in the pot.

Consider Delaying Retirement

If you are nearing retirement age but have the option to continue working, consider delaying retirement by a few years. This decision can have several benefits. Working longer allows you to save more money and delay drawing from your retirement savings.

Monetise Your Hobbies

Explore opportunities to turn hobbies or passions into income-generating activities during retirement. Whether it’s crafting, consulting, or teaching classes, monetising what you love can supplement your income without significantly impacting your lifestyle.

Regularly Review Your Financial Plan

Retirement planning is not a one-time task; it requires ongoing assessment and adjustment as life circumstances change. Set aside time each year to review your financial situation and adjust your budget and investment strategy as needed.

Implementing these strategies can significantly enhance the longevity of your retirement savings. Thoughtful planning today will lead to greater financial security in your golden years.

Till next time.