After retirement, people save for two main reasons. The first is to protect their desired standard of living against unforeseen reductions in their income or increases in their expenses. For example, the first might be caused by cuts in your pension income. It is no secret that national pension plans in some countries are coming under pressure as the number of workers declines relative to the number of retirees. While both tax cuts and increases in the minimum retirement age are potential solutions to these problems, so too are cuts in the benefits paid to retirees. On the other hand, the main risk to a private pension comes when the company sponsoring it goes into bankruptcy, or out of business altogether. Under these circumstances, retiree benefits are often a prime candidate for cost cutting.
A closely related precautionary savings motive would be to provide income for a remaining spouse if the death of the first spouse would significantly reduce pension income.
Protecting themselves against increases in expenses are another reason retirees have precautionary savings. While the most common example of this is the cost of long term care later in life (either at home or in a nursing facility), unexpected house or car repairs also fall into this category.
The second major reason retirees save money is to provide for bequests to others after they die. As a practical matter, there are really two kinds of bequests: those you plan for, and those that result from you dying earlier than expected. So having a good estimate of your remaining life expectancy is very important for post-retirement investment management.
Learn more about Life Expectancy.