Making your retirement income last

There is a vulnerability to retiring and not earning an income anymore. Instead of money coming in every month and your savings increasing, you are spending that money that you have saved over the decades. And not knowing how long we will live for means we don’t know how long our savings have to last us.

With the ARF being introduced over 20 years ago, retirees are opting to retain control of their pension savings into retirement. With that control comes responsibility for investment risk.

Pre retirement, if there was a crash, you could leave your pension alone and give it time to recover. But post retirement, you have to take income out of your ARF on an annual basis. What happens if there is a market crash just before you start retirement? Will that impact on how long your income will last?

We look at two people, Alice and Darragh who both have €1 million in their ARF. Both believe in capital markets and opted to invest their ARF in the MSCI World Index. Alice opts to take 4% from her fund each year as income. Darragh opted to take 4% of the initial investment amount each year as income i.e. €40,000 a year.  Both will receive their income as an annual lump sum on 1 December each year. We will look at what would have happened to their ARF depending on when they retired.


Retiring in 1995 is our control group. We saw a period of very strong market growth before a decade where there were two recessions. I wanted to see the impact of the two recessions after an investor had time to grow their money.

After seeing her ARF grow to €2.77m, Alice then saw her ARF fall to €1.15m and then further still to €879,000, with her income adjusting along the way. It would be worth €3.15m today and Alice is due to receive an income of €126,000 from her ARF this year.

Darragh saw his ARF grow to €2.98m before falling to €1.3m and then down to €1.15m. It is now valued at €5.5m today and Darragh is due to receive his fixed amount of €40,000 again this year.


If you retired in 2000, you got cobbled from all sides. It started with the dotcom crash and just when things looked to have improved, the credit crunch recession hit. Two bad recessions in the first decade! Ouch.

Alice saw her ARF fall in value down to €409,000 in 2003 and she received an adjusted income of €16,360 that year. It fell further to €318,000 in 2009 and Alice received just €12,720. She got through it though and he ARF is worth €1.15m today and she is due to receive €46,000 this year.

Darragh maintained his €40,000 income despite there being two recessions and was adamant he wasn’t making any adjustments. He got his last payment from his ARF in December 2020 of €28,000. He doesn’t have any money left.


In this scenario, our retirees Alice and Darragh were lucky enough to miss the dotcom recession but unlucky to retire just before the second one of that decade, the credit crunch recession.

Alice saw her ARF fall in value to €493,000 and she took an adjusted income of €19,720 that year. Markets have gone on a very strong fund since then and she has seen her income grow as her ARF grows. Her ARF is now valued at €1.66m and she can expect an income of €66,400 this year.

Darragh has maintained his €40,000 income even after seeing the value of his ARF fall to €476,000. It is now worth €1.53m.


I picked extreme dates and investors with 100% equity investment, something that will not happen to most people but it does highlight the need to adjust your income to be able to maintain the value of your savings. Most retirees do take income as a percentage of their ARF, so it does adjust each year.

Maintaining a fixed level of income without adjustment through times of recession is going to increase your chances of running out of money. Likewise in times of growth, taking a fixed amount can leave more money in the asset to grow each year (in an ARF, you do have imputed distribution rules to satisfy). I also ran a scenario of a less risky 60/40 investment mix and if Darragh retired in 2000, he would run out of money next year, so it is clear the lack of adjustment of withdrawal rate is a telling factor.


I hope this of benefit to you. If you have any questions, drop me an email at


Steven Barrett

30 July 2021