Decumulation Strategies in Retirement

Decumulation strategies

How you spend the money you have set aside for retirement is as important as how you accumulated it. Your spending in retirement can be different than how you spend money today. You may not have a mortgage payment, children to support or costs to commute to work, but you can have new expenses like prescriptions and medical costs. As you get older you may not be able to do all the things you could when you were young. That could mean hiring folks to rake leaves, shovel snow or fix something in the house. You may wish to travel more, or take up new hobbies. In other words, your life could change. Having a retirement drawdown strategy can be a necessity to live comfortably in your golden years without worrying about your retirement savings. Here are few suggestions on how you could approach decumulation.

Determine How to Withdraw Money and How Much

In order to make a decumulation plan, you have to know how much money you’ll need. To make sure you are financially prepared, start by taking a look at the lifestyle you want and the expenses required to support it. Be conscious not to withdraw any more money than you need.

  • Make a budget – Go through all of your expenses, including debt (credit card, car payments, loans, mortgage, relocation, travel) to map out how much money you’ll likely spend each month in retirement.
  • Consider part-time work – Part-time work is a part of many people’s retirement for extra income, or just to stay active. If you plan to work part-time make sure to factor in that money and how it might affect your assets and regular money withdrawals from your nest egg. The more income you have in retirement the less you may need to draw down.
  • Know your health care and insurance costsOut of pocket healthcare costs for a 65-year-old couple is estimated to exceed $260,000. And given the trend towards longer life expectancies those costs could be higher. Make sure you examine your health, as well as your family health histories, and the potential health effects of your location. It’s also a good idea to get familiar with how Medicare and Medicare Supplemental Insurance work.
  • Determine where you want to live – The taxes and expenses you’ll pay in retirement will be determined by location. Spend time researching lower cost/higher quality of life places in the U.S. or abroad.  
  • Think about an installment plan – If you are looking to structure your retirement savings, an installment payment program can help you stay on track long-term. Installment payments will give you the ability to create a flexible payment cycle that allows you to use your savings, pension and other income sources in a way that works best for you.

Explore Annuities

Annuities are a good way to manage longevity risk (the risk of outliving your money). Annuities may provide financial stability, offer key tax advantages and can help allow you make long-range plans without worrying about spending all your retirement income. In exchange for a portion of your retirement savings, they can deliver a guaranteed monthly income for as long as you live. There are various types of annuities available to you through annuity distributors, but they are dependent on different factors. Figuring out the best kind of annuity for you requires an examination of your retirement income. You also have to assess your health.

Meet with a Financial Professional

Meeting with a qualified financial professional who specializes in retirement planning is recommended. Make an appointment well before you retire to find a professional who can help you navigate all the financial options available to you, and offer strategies for long-term planning.  


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