Death. Divorce. Job loss. Sometimes tough stuff happens. Unfortunately, these not-so-great milestones often come with a financial impact. So, what do you do if you have to get a divorce? Or if a loved one suddenly passes away? Or if you find yourself with more debt than is comfortable? In our series, Real Talk for the Tough Stuff, we’ll tackle some of these situations head-on with the honest financial advice you need to get through and get on with life.
Next up, Real Talk for the Tough Stuff: What happens if your retirement savings run out?
Here’s the good news. Canadians as a whole are living longer. But longer life expectancies can also mean that your retirement savings need to last a little longer, too. This of course begs the question: What exactly happens if your retirement savings start to run out, but you still have lots of life left to live?
To get the full perspective, we spoke with George Weatherbie who works with Credential Financial Strategies, Provincial Credit Union on Prince Edward Island’s wealth management partner.
Buckle down your budget
As with any stage in life, the first step toward getting a better handle on your retirement savings is to take a hard look at your budget.
“I often get people to keep track of every single purchase for 30 or 60 days. Then, I get them to sit down and look at the numbers. You might have budgeted $150 for dining out every month, but in reality, you’re spending $250 on that particular area,” says George. “Our actual budgets vs our expected budgets don’t always align.”
Finding efficiencies in your budget is the number one way to make that nest egg last a little longer. Yes, sometimes that means you might have to make some lifestyle adjustments, but in the long run you’ll be better for it.
“A lot of people forget they’re on a fixed income when they retire,” says George. “If you’re used to making a little extra here and there through a bonus, or picking up some overtime and then suddenly that goes away, you need to make sure you’re adjusting your spending habits accordingly.”
Revenue vs expenses
If you’ve taken a hard look at your budget and cut back where you can but still find that your savings aren’t going to stretch as far as you may have hoped, then it’s time to start looking at other ways to make some cash.
“It’s really just a simple equation—revenue in needs to be greater than your expenses going out,” says George. “If your expenses out are greater than your revenue in, then you have a problem!”
Not everybody wants to spend their golden years working, but getting a part-time job might be one solution to help make ends meet a little more comfortably. If you don’t want to—or are unable to—work, then it might be time to take a hard look at your assets.
Think about things like vehicles—how many does your household have? Could you get by with fewer? Selling a vehicle that you no longer need is an easy way to free up some cash.
Then there’s always your home. Many people live in their home mortgage-free by the time they reach retirement age.
“Your home is a huge asset. And if it’s paid off, it could represent a significant amount of equity, or even cash flow if you were to sell it,” says George. “If you’re still living in your family home but your kids are gone, downsizing might make a lot of sense. Or take a look at your property, could you parcel off some land and sell it?”
Learn how to say no
Something else George notes that could be a way to preserve your retirement savings a little longer is learning how to say no.
“I see a lot of people who are helping out their kids, their grandkids, family members—you name it—financially. It’s hard to say no, and it might not be what you want to do, but sometimes you need to look after yourself first,” says George.
There is no silver bullet when it comes to retirement savings. It takes discipline, planning, and sometimes sacrifice to make sure everything you’ve worked so hard to save lasts until the end.
Need a little advice of your own? Talk to one of our financial experts.