Retirement PlanningHow Long Will My Money Last When I Retire?


How Long Will My Money Last When I Retire? Answering this question is a crucial element of planning. It is vital to comprehend the duration you can depend on your money to ensure you can manage when the time comes. This article will discuss how long your money will last when you retire and how to make it last longer.

How Long Will My Money Last?


Calculating how long your money will last requires understanding your expenses. To know how many months you can cover before your savings would deplete, taking an inventory of all your expenses is a necessary first step.


When you retire, you must ensure that your savings are sufficient to cover all future regular outgoings, including food shopping, car payments, money owed, taxation, and trips. Moreover, you should include any loans you have during this period.


Using an estimated return, you can calculate how much your savings are likely to grow or how fast they will deplete. For example, if you save money in a bank account, there is an interest rate of 1-4% p.a., while if investments in stocks and shares are made, you can expect a 7 – 9% p.a. return through income and capital growth.


How Can I Calculate How Long My Money Will Last?


If you plan for retirement, the question of how long your money will last is important. While you can calculate the life of your funds manually, the most reliable way is to use a retirement calculator. Speak to your financial planner, as they will be able to assist with this calculation. With careful calculations, you can estimate how long your money should last in retirement.


Another thing, inflation is defined as the rate at which prices, wages, and other general costs rise over time, so it’s essential to consider its effects when calculating how long your money will last you in the long run.


What Are The Benefits You Will Receive During Retirement?


Australians benefit from two important factors: Age Pension and superannuation. The Age Pension provides a safety net, while superannuation allows for tax-effective retirement savings. A regular calculator will likely underestimate the retiring savings due to these two beneficial elements, thus correctly accounting for  Age Pension and superannuation is crucial.


Retiring with all the correct steps taken such as maximising superannuation entitlements and claiming the full Age Pension entitlements, would enable your savings to last far longer. Moreover, there are certain tax advantages and rules that govern retirement income so unless you’re an authority on the subject, it’s better to seek advice from a professional.


One of the most important considerations when planning for retirement is how your superannuation funds are invested. This will directly influence how long your money will last in your golden years.


How Can My Super Last Longer?


You have the flexibility to choose from many different investment approaches to achieve your desired retirement income goals. With careful planning, your superannuation balance can last throughout your lifetime.


Retaining Employment


Working longer significantly extends the lifespan of your super by increasing the period where no or limited funds are withdrawn plus the benefit of more contributions being made. This can be done through employer contributions or personal deposits over time, aiding to preserve your funds capital.


Cutting Your Retirement Expenses 


When you retire, one of the most effective ways to make your assets last longer is to reduce your retirement expenses. By cutting back on luxuries and non-essential items, you can free up more funds for other necessities. Additionally, it’s important to be mindful of how you manage your money by setting a budget and carefully tracking your spending habits. Getting control of your expenses will go a long way to helping you answer the question of how long will my money last when I retire.


Moving from a higher-value property to a lower-value dwelling can result in the release of capital that can be invested into providing you with an ongoing income during retirement. This could help ensure your super lasts longer and helps support you throughout life after work.


Not fully enjoying retirement and spending too little is also a major risk, gaining confidence that you are spending at the correct sustainable level, safe in the knowledge that your capital will not run out is critical.   


Prioritizing Retirement Over Financial Legacy


When considering leaving a financial legacy for loved ones, it’s important to resist the temptation to ‘go big’ and aim instead to let their capital last longer. Although some may desire to provide large sums of money as a token of love, some children firmly believe that parents should be able to enjoy their retirement without stressing about leaving something behind. After all, you have worked hard for your money. 


Taking Chances In Growth Assets


Allocating a more significant proportion of your capital toward growth assets (like shares and real estate) while reducing reliance on more conservative assets (like cash and fixed interest) increases the risk associated with your investments.


Growth assets may yield higher returns; however, these higher returns also come with higher risks, as no certainty that improved returns will be achieved. An equity market drawdown could mean your retirement funds diminish quicker than if you invested in a more conservative option.


Seeking Advice From Financial Planner


Having the assistance of an experienced financial planner can help optimize your retirement funds and increase the chances of you reaching any targets you have set. They can help you develop a strategy for preserving and protecting your superannuation throughout your retirement. Taking advantage of their expertise should give you peace of mind knowing that you have taken the necessary steps to ensure a secure financial future.


So, How Long Will Your Money Last When You Finally Retire?


We’ve discussed calculating how long your money will last and what you can do now to make it last. By considering the factors determining the sustainability of your savings, you can calculate and establish how long your money will last. We’ve talked about the strategies you may employ to make your money last longer, such as retaining employment, cutting retirement expenses, prioritizing retirement above leaving a financial legacy, taking chances with growth assets, and obtaining advice from a financial planner.