We had savings, a plan, and a defined timeframe \u2013 we were fine. Still, I felt uneasy. It was like walking on a glass floor, hanging out way over a cliff. Would our plan actually hold weight? It was a glimpse into what \u201cproper\u201d retirement might feel like.<\/p>\n
For many retirees, the hardest transition is psychological \u2014 learning to spend money after decades spent accumulating it. Photo \/ 123rf<\/p>\n
Accumulating wealth makes us more confident over time. Decumulation? Not so much. Year by year, you\u2019re depleting a finite resource that you\u2019ve nurtured your entire life, and you\u2019ll find it harder to bounce back from mistakes and market downturns.<\/p>\n
It\u2019s no wonder that even well-prepared retirees are nervous about \u201cputting weight\u201d on their strategy. Retirement should be a great experience, but if you\u2019re worried about money, it often isn\u2019t. You might know that \u201csomeone has to spend this money, so it may as well be me\u201d, but becoming comfortable with that reality takes time.<\/p>\n
Weathering post-65 psychological shifts would also be simpler if the system gave us a clearer structure. This is where New Zealand falls short.<\/p>\n
NZ Super gives us a type of \u201cuniversal basic income\u201d from age 65, but, on its own, it doesn\u2019t offer much choice. To bridge the gap, some people downsize their home, cash in their KiwiSaver, sell the business, or wait for an inheritance.<\/p>\n
However you get it, a lump sum at 65 is just the start. If that money needs to cover the gap between NZ Super and the life you want to live, decumulation means you spend a little bit now while the bulk remains sensibly invested for later. Broadly speaking, you have choices around how to make this work. Here are some ideas.<\/p>\n
Many retirees struggle with spending due to a lack of financial advice and structured decumulation plans. Photo \/ Getty Images<\/p>\n
The simplest option is to park your money in a savings account or term deposits, then spend a set amount of it each fortnight. It\u2019s safe, but interest rates are often low, sometimes barely covering inflation.<\/p>\n
If you want to keep pace with inflation, you\u2019ll need to invest your nest-egg. You could invest into managed funds, then follow a rule of thumb like the 4% withdrawal rate. Here, you spend 4% of your portfolio each year, adjusted for inflation, and, if it goes well, it should last around 30 years. There are no guarantees with returns, of course, so be flexible, and review your strategy regularly. If this sounds too technical, there are options closer to home, literally.<\/p>\n