It’s uncomfortable watching your bank balance reduce. After a lifetime of trying to build wealth, there comes a time when you’ll want to spend it and eventually run it back down to zero. Nevertheless, when you’ve had a few decades of saving (perhaps quite successfully) spending may not come easy.

When I worked as a financial adviser, I would ask people if they wanted to spend all of their savings to fund their retirements. Although some might have wanted to leave the house to the children (in whole or in part) the majority were happy to spend all their savings. Yet most underspend.

We do need to strike the right balance so that we spend enough to have a good retirement, but not so much that we end up in poverty. When it comes to how much we can take from our savings, the problem is there are many unknowns: we don’t know how long we’ll live, what returns we’ll get on our investments, or what inflation will be. Nor do we know what extra expenditure we may have, whether for our health, our loved ones, or perhaps unexpected work on the house.

We know that expenditure is likely to gradually fall in retirement, but we don’t know when, or by how much. There are just so many uncertainties. However carefully we may plan our drawdown, life happens – and that can throw everything up in the air.

That’s why so many of us play it safe and underspend in retirement. This is sensible insofar as it might allow us to manage in an emergency.  So often the drive to have the best life possible is not as strong as the drive to ensure that our money lasts as long as we do.

Playing it safe and underspending at the start of retirement is common - in fact, in my experience it’s more than common, it’s ubiquitous. We get so concerned about our money running out, we forgo the trip to the Gold Coast or the new lounge suite – anything to make sure that we will always have enough.

I think there’s a better solution to uncertain income in retirement – instead of underspending we should consider our home as a backup income source. This means that if your savings are starting to run out, you can switch to home equity release.

Home equity release is now offered by several different providers, giving you a choice of products. You probably already know that Lifetime Home (Click to View) was released recently. This offers a whole new approach to using the equity in your home for income later in retirement (remember that I am a director and shareholder of Lifetime).

Lifetime’s unique product offering is a good thing for the market as a whole, making it bigger and more secure. I think we can be fairly certain that there will be home equity release products available in the future should you want or need one.

Learn about Lifetime Home - Debt-Free Home Equity Release.

So, in retirement you could determine an adequate drawdown rate for your income from investments – or you could decide to spend a bit more. You might plan for your expenditure to fall significantly as you age but, if it turns out you spend more than you’d expected, you can be reasonably assured that there will be a home equity release product to keep bread on the table.

For example, say you have $400,000 of savings. If you drew down $24,000 each year (i.e. 6% of the capital) and also took a couple of overseas trips, after five years you might find your capital looks quite depleted, for instance if your investments produced poor returns, or it might be that you have enough to maintain your lifestyle for a while yet. Either way, you could continue your existing rate of spending and count on a home equity release product to top you up in the future.