“Retirement is full of uncertainties, so many people think the safest strategy is to spend as little as possible,” she says.

“There’s nothing wrong with that approach if you don’t mind going without for the benefit of your children.”

She says most retirees these days are happy if their children inherit the house and whatever money is left after their own needs have been met.

For that reason, some don’t want to leave a fortune to their kids when they die.

The way to avoid underspending is to address the financial uncertainties that lie ahead as much as you can, she says.

There are three big uncertainties:

· How much money will I need?

· What will my investment returns be?

· How long will I live?

“Longevity is difficult to predict, and the most positive approach is to assume you are going to live a long time. For people who reach 65, life expectancy is around 90 and increasing, however, many people are retiring later than 65.

“On average, you can expect to live between 25 and 30 years in retirement. Plan your finances accordingly,” Koh says.

She suggests breaking these years down into three periods of five to 10 years. Divide your available funds between these periods. She calls it the ‘Three Bucket Approach’.

· Day-to-day living expenses.

· Money for big, one-off expenses such as replacing your car.

· Taking overseas holidays, if you plan on doing so

· Maintaining your home.

· Covering health-related costs such as hearing aids and dentistry.

She says as you get older, your spending patterns will change, and you could spend less.

Within each of the three periods, the amount you can spend will be limited by what you’ve allocated to that period and the investment returns you might receive.

The more detailed you can make your expenditure plans, the less uncertainty you could face and the less likely it will be that you underspend.

First published 24 September, 2018

Story by Liz Koh

Liz Koh is an Authorised Financial Adviser and author. The advice given here is general and does not constitute specific advice to any person. Before relying on it, we recommend you speak with a financial adviser. A disclosure statement can be obtained free of charge by calling 0800 273 847.

JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.