One of the biggest concerns when approaching retirement is simple:
What if I run out of money?
You may have spent decades building pensions, investments and savings, but once you stop earning, it can feel very different to start taking money out.
So, how long will your money actually last?
What determines how long my retirement savings will last?
There isn't a simple calculation because several things are happening at the same time.
How long your money lasts will depend on:
How much you have
How much you spend
When you retire
Your State Pension and other income
Investment performance
Inflation
Tax
How long you live
Even relatively small changes to these assumptions can make a significant difference over a retirement that could last 30 years or more.
How much can I withdraw each year?
You may have heard of rules suggesting you can safely withdraw a certain percentage of your pension or investments each year.
These can be useful as a starting point, but retirement rarely fits neatly into a rule.
You might want to spend significantly more during your first ten years of retirement while you're travelling and enjoying your free time, and less later.
Your withdrawals can also be adjusted over time depending on investment performance and your circumstances.
What if markets fall when I retire?
Investment returns don't arrive in a nice, predictable order.
A significant market fall during the early years of retirement can have a greater impact if you're withdrawing money at the same time.
That doesn't necessarily mean you need to stop spending or avoid investing.
It means your retirement plan should consider what happens when things don't go exactly to plan.
What if I live longer than expected?
Nobody knows exactly how long their retirement will last.
Planning only to average life expectancy could leave you vulnerable if you live considerably longer.
Lifetime cashflow planning allows us to model your finances well into later life and test different assumptions around spending, inflation and investment returns.
We can ask:
What happens if I live to 100?
What if investment returns are lower than expected?
What if I spend more during my early retirement?
What if I have an unexpected large expense?
Retirement planning shouldn't be about spending as little as possible
The fear of running out of money can sometimes lead people to the opposite problem: being too cautious.
You could reach the end of retirement with significantly more money than you ever intended, having spent years worrying about whether you could afford holidays, experiences or helping your family.
A good retirement plan should give you the confidence to understand what you can afford to spend, not simply tell you to preserve as much money as possible.
The goal is to make your money last.
But it's also to make sure you enjoy it.
More retirement questions
Can I afford to retire?
When can I afford to retire?
How much pension do I need to retire comfortably?
How much income will I need in retirement?
Can I retire early?
How do I make sure I don't run out of money in retirement?
I have pensions, ISAs and savings. How do I know if I have enough to retire?