That you should save for retirement is an established good-practice. However, several retirees seem to underestimate the importance of saving during retirement.

Saving is a financial response to life's inherent uncertainties. You cannot be too old to save and should not be in a situation where you cannot even afford to save a dime. Saving during retirement is important for several reasons. It better prepares retirees to combat the risks of longevity and inflation, facilitates prudent financial management and assists with unforeseen expenses and medical bills that may arise during your golden years.

Combat longevity risk

Longevity risk is the risk that you will last longer than your retirement savings. Although many retirees do not save enough to maintain their standard of living, it is still critical to put aside money from your retirement income to boost your retirement savings. This helps your retirement savings to last longer, particularly when you may live as much as 30 years in retirement. Instead of depleting your savings significantly, you should add to it- at least for the first few years of retirement. Otherwise, you risk depleting your retirement savings at a financially-crippling rate.

Inflation

The impact of inflation beyond your retirement is significant, especially if you survive on a fixed retirement income. Inflation increases the cost of living and reduces the real value of your retirement savings. When you save money, you are not merely catering for uncertainty but creating a buffer against the certainty of inflation.

Prudent financial management

Financial planning- or even retirement planning for that matter- does not end at retirement. Saving is an activity that facilitates your management of finances. It puts you in control of your retirement income and savings by helping you to live well within your means. Financial management is concerned with meeting today's needs and providing for tomorrow's needs as well. Saving simply ensures that you have finances to manage during your retirement.

Retirement expenses

When you retire, you are likely to experience a reduction in living expenses. However, this reduction is offset by the likelihood of increased medical expenses and contingent needs as you get older. Statistically, retirees are most likely to develop medical complications past the age of 70, making it imperative that you save to offset major medical expenses later.

Saving during retirement is about being prudent. You cannot live as if your retirement will last only five years or as though you expect to drop down sooner than later. When you save, you address the uncertain costs and certain risks that you face in retirement. It is better to die with money in your estate than to live with only pennies in a piggy bank.

Learn more about this author, Darrell Victor.
Click here to send this author comments or questions.

---

Add your voice

Know something about Why you must save during retirement?
We want to hear your view. Write now!