Why some retirees outlive their savings – and how to avoid this

Retirement is supposed to be the payoff for a lifetime of work: a season to rest, reconnect, and enjoy freedom on your own terms. But for too many Singaporeans, that dream comes with a nagging question: “What if I run out of money before I run out of life?”

It is a fear that is both rational and preventable. The danger of outliving one’s savings does not usually come from reckless spending. More often, it is the quiet math of longer lifespans, market volatility, lifestyle creep, and unexpected shocks that slowly erode retirement funds.

Here is a closer look at why this happens and how to make sure it doesn’t happen to you.

We are living longer than we think

Singaporeans today are among the longest-living people in the world. The latest official figures show life expectancy has climbed to about 83.5 years (with men averaging over 81, and women about 85 and a half). For those who reach their mid-60s, there is a good chance of living another 20 years or more.

That is a blessing, but it also means retirement now lasts far longer than the generations before us. A plan that assumes you will only need income till 80 may fall short by a decade or more. Those “bonus” years are often when healthcare costs rise, mobility declines, and living assistance or caregiving support becomes necessary.

The fix: When you calculate your retirement income, plan for at least 25 to 30 years of post-work life. If you and your spouse are both healthy non-smokers, build a financial model that lasts until the early to mid-90s for at least one partner.

Sequence-of-returns risk: the hidden killer of good portfolios

Many retirees assume that if they have saved enough, they will be fine drawing down a fixed amount each month. The problem is that markets do not move in straight lines. A few bad years early in retirement, especially if you are withdrawing regularly, can permanently shrink your nest egg, even if the market recovers later.

This is called sequence-of-returns risk. Two retirees with the same investments and withdrawals can end up with vastly different outcomes simply because one began retiring in a bull market, while the other retired in a downturn.

The fix: Do not rely on a single pool of investments. Instead, divide your retirement savings into “buckets”:

• Short-term cash and fixed deposits for near-term spending
• Income assets like bonds or REITs for the medium term
• Equities for long-term growth

That way, you will not be forced to sell growth assets when markets dip. Holding just 1–3 years of expenses in liquid form can drastically reduce the risk of running out later.

Lifestyle creep and inflation: the slow drain

Even with careful planning, expenses have a way of creeping up in retirement. There is more free time for travel, dining, or hobbies. You might upgrade your insurance, contribute to family needs, or pay for medical devices and supplements. And then inflation quietly raises the cost of everything from groceries to grab rides.

Surveys by local banks consistently show that Singaporeans underestimate how much they will need to maintain their preferred lifestyle. What feels comfortable at 55 may feel stretched at 75.

The fix:

• Build in at least 2–3% annual inflation when projecting your expenses.
• Distinguish between needs (housing, food, insurance premiums) and wants (travel, gifts, hobbies).
• Peg your “wants” to market performance: spend more when returns are good, dial back slightly when they are not. This simple flexibility can add years of sustainability to your portfolio.

Healthcare and shocks: the unpredictable wildcards

Even with MediShield Life, MediSave, and Integrated Shield plans, Singapore’s healthcare inflation and out-of-pocket costs can be punishing for retirees. Chronic conditions, hospital stays, or caregiving expenses can quickly deplete liquid assets.

And not all shocks are medical: a family member in need, rising living costs, or unexpected home repairs can strain even well-prepared budgets.

The fix:

• Maintain a dedicated emergency and health buffer, separate from your daily spending account.
• Review your health insurance regularly to ensure it covers realistic inpatient and post-hospitalisation costs.
• Do not underestimate long-term care needs; consider whether your plan covers them adequately.

Common money habits that shorten your savings’ lifespan

Even retirees with healthy balances fall into these traps:

• No liquidity buffer: All assets are invested, leaving no cash to draw from during downturns.
• Fixed withdrawals despite market cycles: Selling investments at a loss erodes future income potential.
• Ignoring longevity: Planning to age 80 when life expectancy is creeping towards 90+.
• Lifestyle inflation: Spending freely in the early years, leaving little for later life.
• Underinsurance: Assuming CPF or basic medical plans are enough.

Each of these alone may seem harmless. Combined, they can shave years off your financial runway.

A framework to help your money last as long as you do

You cannot predict markets or lifespans perfectly, but you can design your plan to withstand both.

1. Think in income streams, not lump sums

Align every income source with a specific purpose:

• CPF LIFE or annuities → Essentials like food, bills, insurance premiums.
• Investments → Discretionary spending like travel and hobbies.
• Cash or SSBs → Short-term needs and emergencies.

2. Build “retirement buckets”

• Bucket 1 (cash): 1–3 years of essential expenses.
• Bucket 2 (income assets): Bonds, dividend equities, or endowments.
• Bucket 3 (growth): Equity funds or ETFs for long-term inflation protection.

3. Adjust your withdrawals dynamically

If your portfolio performs well, you can draw a little more. In weak years, trim your discretionary withdrawals. This small act of flexibility compounds dramatically over time.

4. Keep reviewing, not reacting

Revisit your plan once or twice a year, not every time markets move. A calm, systematic review helps you adjust early and prevents panic-driven decisions.

A tale of two retirements

Imagine two 65-year-olds, both retiring with S$800,000.

• Mr Ong keeps a three-year cash reserve, withdraws modestly, and adjusts spending based on returns. His savings last well into his 90s.
• Mr Lim invests everything in equities, withdraws a fixed S$3,000 a month, and sells during market dips. He runs short by his late 70s despite starting with the same amount.

The difference? Not the market, not luck, but strategy.

The takeaway: Longevity is your greatest financial challenge

Running out of money is rarely caused by one big mistake. It is usually the result of a few small ones repeated over time: underestimating how long you will live, withdrawing too much too early, or failing to adjust for inflation and volatility.

But with the right structure, your money can easily outlive you, not the other way around.

Plan with a long horizon, hold buffers for bad years, stay flexible, and review often. The math of longevity may be relentless, but it is also predictable – and predictability is the investor’s greatest gift.