Fear of running out of money

The fear of running out of money is a phenomenon that describes a common concern that many retirees face. After working for several decades, retirement can be a time to relax and enjoy life, but for some, it can also be a time of anxiety and money worry.

Why do retirees experience the fear of running out?

Retirees may experience the fear of running out for a variety of reasons. For some, it may be due to a lack of savings or retirement income. Others may be concerned about the rising costs of healthcare or unexpected emergencies that may arise in their older years. Retirees may also worry about the possibility of outliving their savings or the impact of inflation on their purchasing power. These are all valid reasons to be concerned and can be especially stressful during periods of climbing inflation!

The other reality is that people are living longer these days and retirees are more likely to be faced with the possibility of outliving their retirement savings. The longer people live, the more likely they are to experience unexpected expenses, such as healthcare costs, which can quickly deplete retirement savings. As a result, retirees are increasingly turning to financial advisors to help them plan for a longer retirement and manage the fear of running out of money.

Tips to avoid the fear of running out

1. Understand your numbers

The first step is understanding your numbers including how much you will need for retirement. Knowing the numbers and having confidence in them will empower you to feel calm during stressful economic times.

ASFA’s December 2022 figures revealed that single people need $595,000 and couples need $690,000 in super retirement savings to achieve a comfortable retirement. These numbers assume you begin retirement at age 67, own your own home, and enjoy a part Age Pension, which will top up your savings to provide singles with a total annual income of around $49,462 and couples $69,691.

It is important to note that what is comfortable to you, may not be comfortable to someone else, and vice versa. Your ideal retirement number is unique to you and dependent on several factors, including where you are living, how much travel you are planning, your health and sources of income.

Once you have an idea of your needed annual income, you can work out what that might mean in terms of savings you’ll need to retire with, taking into account other sources of income you may have to live on, such as part-age pension payments and investments outside of super.

2. Boost your super savings

If you are nearing retirement, there are several strategies that you can use to boost your super now, which will ease the stress in future years. We recommend looking into options for salary sacrificing, personal contributions, and exploring the many other ways to boost your super balance.

You can also boost your savings by considering whether you are open to working for longer or even working part-time in retirement. By extending your time in the workforce, you’ll have more time to save, providing you with peace of mind before you are emotionally ready to make the leap.

3. Cut back on expenses

A simple way to ease your stress is by cutting back on non-essentials to boost your savings power. ASFA’s ‘Small change, big savings’ tool is a good illustration of how easy it can be to cut back on small things which will make a big difference to your numbers. Creating a budget is a great way to get a clear picture of where your money is going each month. By identifying areas where you are spending more than you need to, you can make adjustments to reduce your overall expenses.

4. Seek financial advice

The fear of running out is a common concern for retirees, especially during uncertain economic times. However, everyone’s financial circumstances are unique. Sometimes this fear is valid and in other cases, you may simply need a plan to give you confidence. We always recommend working with a financial advisor to develop a plan that meets your individual needs and goals. 

Get in touch with the team at APS Financial Planning to learn more.

Written by APS Senior Financial Advisor, Paul Hatzigeorgiadis.

Paul has over 25 years of experience in the financial services sector. Over Paul’s history, he has provided advice to an extensive range of clients from wealth accumulators to pre and post retirees advising them on Wealth Creation, Cash Flow Management, maximising Centrelink benefits in Retirement, Personal Insurances, Debt minimisation strategies and Superannuation. Paul is married with an 11-year-old daughter and enjoys spending time with family and friends.  Whether it’s assisting clients to meet their short-term goals or working with them over a longer term, Paul enjoys helping guide his clients with their financial future.

Get in touch with Paul and the APS Financial Planning team.