How can one reduce the risk of outliving their savings?

Starting to save early in life is pivotal for reducing the risk of outliving savings for several reasons. When individuals begin saving sooner, they can take advantage of compound interest, which allows their investments to grow significantly over time. The earlier one starts saving, the more time their money has to accumulate, leading to a larger retirement fund.

Additionally, beginning the savings journey early often means that individuals can contribute smaller amounts over a longer period, making it more manageable. This strategy can alleviate the pressure to save large sums later in life when financial responsibilities may increase.

In contrast, saving only in your 40s limits the time frame for growth, leading to a smaller nest egg upon retirement. Investments in high-risk stocks may yield higher returns, but they also come with increased volatility, which might not be suitable for someone approaching retirement age. Making larger annual withdrawals can deplete savings more quickly, increasing the chances of running out of funds. Hence, starting to save early is the most effective strategy to ensure long-term financial stability and reduce the risk of outliving one's savings.