I now know of many couples in their 70s, 80s, and even 90s who have run out of money. Mostly it is that they never thought that they will live so long, did not even earn enough (cannot blame them that they did not save enough), but yes, their money has died before them!

What does one do in such cases?

Well one of the person in his 70s is being supported by the brothers of the wife. He himself does not have a brother, and his sister is herself dependent on her children. This help has taken a route where her brother has given them a house to live in where he pays the society maintenance. They have enough money to pay for the food and medicines.

In another case of an older person with a pension, his son has bought him a house and pays all the expenses. He gives them his car and driver and his wife buys most of the provisions. The pension pays for the servants, and some of the day to day expenses. 3 children all well off, so the ‘running out of money’ is not visible to the outside world. Typical case of many people in their 70s and 80s I guess.

For most of these people they did not earn enough to buy themselves an annuity. They bought themselves one house – and they need the house to stay in. Some of the people have sold their first house in a good locality and re-located to a less expensive area and are living off the sale proceeds of the house. I would not say this is a case of running out of money, but yes it is a case of running out of liquidity for sure.

How much to save, how much to draw down and how to allocate assets in retirement is difficult, but has to be done. You could either do a fixed amount spending strategy for post retirement expenses. Variable-spending strategies are similar to constant-rupee strategies in that they spend periodically from an investment portfolio but differ in that they spend a periodically increased amount based on portfolio performance – they spend more in good markets and less in bad markets. This is of course a big difference. There are 2 choices in drawing strategies – spend a fixed (predictable) amount on a monthly basis.

Spending strategies explore ways to draw down a portfolio without outliving it but they do so without bothering about the expense side of life.

Immaterial of which of these strategies you choose, you will spend the amount you need to spend after retiring. If you need a medical operation, or your car broke down, you will pay for those things regardless of what your spending strategy says.

I would happily use the bucket strategy – withdrawing from the debt and liquid funds during a recession, but I would happily do a SWP from an equity fund in a flat or rising market. I may also start over weight equity so that when I withdraw from equity in a rising market, the asset allocation does not get skewed.

One thing I can tell you – there are NO easy answers!!