Retirement Life
17 May 2022

Financial Resilience for Retirees

In times of financial crisis, the term financial resilience often enters into conversations.

Financial resilience is the ability to withstand life events that impact one’s assets or income. In plain language, financial resilience is the ability to ‘roll with the punches’ and survive, despite setbacks and adverse events.


Examples of financially stressful events include a crisis that affects the economy, such as a recession or a share market crash, and also personal circumstances such as the death of a loved one, relationship breakdown, redundancy, major illness or significant unexpected expenses.


Financial resilience is important at all stages of life, including retirement. In fact, you could argue that it is even more important in retirement, as the lower levels of income in retirement make it much more difficult to recover from an adverse event.


There are three key areas that determine your financial resilience:

   1. Your personal characteristics

   2. Your financial resources

   3. Your financial capability


Let’s look at each of these in more detail.

Personal characteristics

People have different psychological reactions to adverse events. Whereas some people crumble at times of crisis, others bounce back and, through their positive attitude, can even see opportunities in the midst of turmoil. Resilient people have clear goals which give them structure and focus. They are flexible in their approach, which helps them adapt to new circumstances. They are also well organised and don’t descend into a state of chaos when hit by something unexpected.


Resilient people are proactive and take responsibility for getting themselves back on track rather than relying on help from someone else. Resilient people are also optimistic about the future and have confidence in their ability to withstand adverse events. Being pessimistic, anxious or depressed can lead to poor financial decision-making.

Financial resources

During your working life, your goal is to grow your financial resources through saving and investing, while at the same time ensuring that wealth is not eroded through loss of income or the breakdown of a relationship. In retirement, wealth is generally not added to, but consumed. However, the same adverse events that can affect you while you are working still apply and can lead to the erosion of wealth. It’s crucial to minimise the impact of these events.


As with other stages of life, it is essential always to have an emergency fund on hand – that is, money that is easily accessible without the risk of loss. Often this takes the form of cash held in a call account. Having cash on hand means debt is avoided. It also means that portfolios that change in value can, if necessary, be left untouched to ride out the ups and downs of markets.


A financially resilient investment portfolio is one that is fully diversified, and which includes growth assets to protect against the effects of inflation over the long term.


The loss of a partner through relationship breakdown or death can have a significant impact in retirement, which is difficult to recover from. The costs of living alone are far greater than half the costs of a couple. Many living costs, such as rates, insurance and internet, are fixed costs that don’t change when the household goes from two people to one. If a relationship breaks down, and this is increasingly common later in life, assets can be halved, leaving both parties in a poor financial situation. Taking care of your health and your relationship is therefore vital for the protection of your financial resources.

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Financial capability

The ability to make sound financial decisions is a crucial part of financial resilience. Investment strategies in retirement are different from pre-retirement. Learning about basic investment principles will help to understand the difference. Learning how market cycles work and the roles different asset types play in a portfolio will help reduce the anxiety that leads to poor financial decision-making.


In a relationship, it is common for one partner to take a lead role in looking after financial affairs. It is wise for both partners to share the decision making equally so that the loss of one partner doesn’t leave the other in a position where they feel ill-equipped to make financial decisions.


Good record keeping is also essential so that in the event of illness or death, it is easy for someone else to step in to take care of things. Ideally, there should be powers of attorney granted to a family member or friend so they can legally sort out your affairs if you become incapacitated.

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Written by:

Liz Koh

Liz Koh is a money expert who specialises in retirement planning. The advice given here is general and does not constitute specific advice to any person.

Invest with Lifetime for a retirement income managed for living.