Retirement risks can have a deleterious effect on your golden years - particularly, on your savings. Clearly, protecting your hard-earned savings is one of the main challenges of retirement. Those who feel that it is not necessary to protect their savings are probably unwilling or unable to accept the inherent uncertainty of life. For the willing and able, there are a few ways to protect your savings before and during retirement.

i) Maintain adequate insurance - particularly health insurance

Insurance acts as a safety net, ensuring that you do not have to dip into your savings to cover financial risks. Income insurance (before retirement) and health insurance (before and after retirement) are essential to protecting your funds. If you become temporarily disabled while working, income disability insurance ensures that you can still contribute towards retirement while meeting immediate expenses. If you are uninsured and face critical illness or medical expenses, then you might significantly deplete savings before and during retirement.

ii) Portfolio diversification

Diversifying your retirement fund ensures that you access the benefits of investing without unduly exposing your savings to market risk. Balancing your asset allocation to suit your needs and circumstances also helps to mitigate inflation risk by utilizing growth options. Those who are risk intolerant can still apportion a small part of their portfolio to mutual funds/ growth options and feel comfortable.

iii) Work longer

With greater average life expectancies, many persons are discovering that they cannot afford to retire early. After all, there are clear disadvantages to retiring early: your savings have to last for a longer period and there is often less of it to stretch over that longer retirement span. Working for a longer period can boost your retirement savings and shorten the period that you spend in retirement.

Apart from this, your benefits will increase because you are older and likely accrued greater benefits from working. Social security/ national insurance benefits are only available past a stipulated age as well. With a higher retirement income, you are less likely to deplete your savings quickly.

iv) Continue saving during retirement

If you are on a fixed income, that income will inevitably lose value over time. By saving some of that income in your early years, you would preclude withdrawing too much from your savings too soon. Continuing to save also implies that you would control the withdrawal rate from your retirement savings in the early stages of retirement. A high withdrawal rate in the initial phase of retirement can handicap your retirement savings, because the opportunity cost of the withdrawals are significant.

It is likely that your savings will lose real and nominal value over time, especially if you did not plan your retirement properly. However, you can delay the inevitable and stretch your savings for a longer period. With anticipated retirement periods of 30-35 years, in some cases, protecting your retirement savings is compulsory.