‘I’m 91. Can I be sure my cash will last the decade?’’

How can this reader ensure she always has enough to pay the bills? Jonathan Jones gets some expert advice

Making sure the money we have saved during our careers can last our lifetime is crucial, but for 91-year-old Betty Johnson it has become a pressing concern. She recently moved into a rented flat in sheltered accommodation in Hertfordshire to be closer to her family, selling her flat in Surrey for £200,000 to do so. She is concerned that the £2,000-a-month rent may wreak havoc on her finances.

A secretary for an oil company until she was 55, Ms Johnson then worked as a silver service waitress, finally retiring at the age of 80.

She has an additional £48,000 in savings and total pension income of £650 a month. While she lives modestly, there are still a few treats she enjoys, including going to the hairdresser, at least when she is allowed to again once lockdown ends.

She currently has the money in savings or current accounts that pay low rates of interest but would like ike to invest it somewhere that will give ve her a regular income.

JEANNIE BOYLE, CHARTERED ED FINANCIAL PLANNER AT EQ Q INVESTORS, SAID:

Ms Johnson has enough cash to pay her rent for the next 10 years, although though that doesn’t allow for any rent increases. She faces the same dilemma lemma as many of us: how to make money ney when interest rates are close to zero?

Those with long periods before re they need access to their funds can take the risk of investing in the stock market, but Ms Johnson has spending ending commitments in the form of her r rent. This means she has limited capacity acity to take risk.

The ideal home for some of her er capital would be a long-term fixed-rate ed-rate account. Unfortunately, the best t rate available for a five-year fixed term rm is 1.8pc from RCI Bank and that is not sufficient.

I suggest she set aside six years’ rs’ worth of rental payments plus potential inflation-linked increases. ases. I’ve assumed rent increases of 2pc pc each year, which gives a sum of just under £152,000.

With this, she should subscribe be the maximum £50,000 into National tional Savings & Investments Premium m Bonds, where prizes are equivalent lent to an annual rate of return of 1.4pc pc on average.

There is no guarantee that Ms s Johnson will achieve this rate, but it is better than the one-year fixed d rates

currently available. The rest of the setaside cash should be put in the NS&I Income Bond, which currently pays 1.16pc, as it benefits from the security of government backing and the money will be accessible.

This leaves Ms Johnson with a balance of £96,000, which she will need to draw on from age 97. This money needs to grow at a rate equivalent to inflation to make sure Ms Johnson can keep paying her rent.

Over a six-year investment period, we would expect a cautious investment portfolio to achieve this level leve of return. She should stick to a portfolio por concentrated on investmentgrade grad corporate and government bonds, bon with a smaller allocation to stock stoc markets of around 35pc to 40pc.

This T type of cautious investment portfolio por should provide a return of around a 3pc a year net of costs – enough eno to offset inflation. This plan ensures ens the money would last for at least leas the next 10 years after accounting for inflation.

SUSAN SUS HILL, CHARTERED FINANCIAL FIN PLANNER AT SUSAN SUS HILL FINANCIAL PLANNING, PLA SAID:

It would w have benefited Ms Johnson to engage e with a professional adviser at the th start of the decision-making rather rath than part way through, as the disadvantage disa of selling your home is that you then need to use the proceeds to rent r somewhere without knowing how long it could be for.

The T Office for National Statistics says a woman aged 91 has an average life expectancy of 4.3 years and at age 100 an average life expectancy of 2.2 years, year so she should plan for at least 14 years year to be safe.

Inflation In is a stealth robber of the value valu of money. If rents rise by 2.75pc a year, which we have calculated for properties in Hertfordshire, the £2,000 per month becomes £2,623 in 10 years’ time.

Additionally, Ms Johnson may be healthy now but what if she ever needed to go into care? If she is living in a rented property she might have a problem with terminating the rental contract or could incur a financial penalty.

She may need all of her cash to provide for her basic needs and so cannot afford to run out of money. This removes the ability to invest in riskier assets such as shares.

Instead, Ms Johnson should consider buying back into property as this would give her a roof over her head whatever age she lives to.

Buying in Hertfordshire can be expensive, so if the money she has doesn’t cover the purchase price she should look at taking out a “lifetime mortgage” to cover the shortfall.

This rolls up the interest so she wouldn’t have to make any monthly payments. She could look at senior living accommodation, which provides the benefit of a gated community and a warden, although this type of property can be difficult to sell.

If she considers this route she should engage with a mortgage professional to help her find a suitable loan and should seek advice from a suitably qualified professional before taking any future action.

‘BuBuying in Hertfordshire can ca be costly but a new home ho will give her a roof over ov her head forever’

ROOM FOR MANOEUVRE Betty Johnson needs to keep a roof over her head