5 things that may affect your savings in retirement

Once you retire, you may feel like the hardest part 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 naïve 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 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.

Four chronic conditions (various cancers, chronic lung disease, diabetes and cardiovascular disease) contribute to 60% of deaths worldwide. These chronic conditions can be managed (if not even prevented) 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, but make sure you consult with your financial adviser about this option. 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/Testaments are up to date. This is potentially already a big step in making sure that your partner and family will be looked after if something happens to you. Speak to a professional about tax implications, 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. In some cases, people who are taking care of aging parents are also having to give financial support to their adult children. This phenomenon, known as the sandwich generation, is 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 to help your loved ones. Setting boundaries and having honest conversations about money with your family may be difficult, but it is worth it!

Being aware of these five scenarios and coming up with strategies to ease their effect will help you persevere. Empower yourself today by planning for as many of these situations as you can! You can also read more tips on ways to manage your money well.