The dilemma that can reduce retirement to a worry zone

You’ve done the hard yards, worked for decades, accumulated your nest egg and it’s time to kick back or cut back and enjoy some down time or rev up the ‘me’ time.

But from a financial perspective, it’s not that simple. Confidently moving from saving to spending, as certain as possible that your funds will last as long as you do, is a challenge for many – as is finding the balance between being too frugal and too lavish.

An Investment Magazine article, ‘Why decumulation is different’, explains it perfectly.

“The investment goal of an accumulation portfolio is straightforward – return maximisation. Investing in a decumulation environment or investing in retirement is different. Decumulation investing, for the purpose of funding retirement income, is more complex than that required for accumulating assets …

“Chasing the highest expected return is not always the best idea. Sometimes, the risk of an adverse outcome is too large …”

So how to navigate this territory, which is obviously complex but will make or break many retirements?

Stephen Chen, founder and CEO of, offers the following guidance based on interviews with retirement and financial independence experts. He says:

  • Get mentally prepared to shift from saving to spending down your assets. It’s psychologically hard for savers to become spenders, so you need to think this through in advance or you’ll run the risk of not enjoying the fruits of all of your hard-earned saving and investing.
  • Document your spending and build a real budget. This is also an opportunity to really imagine what you want your life to look like and get more efficient about your spending.
  • Simplify your life. Remember when you’ve moved in the past? Most get rid of a LOT of stuff. Think of the transition to retirement as an opportunity to KonMari your life and get rid of stuff that ‘doesn’t spark joy’.
  • Set up your investments in a way that makes you confident, reduces market volatility and sequence of returns risk. Many people keep one to two years of income in zero risk savings.
  • Set up a plan and process for monitoring your assets, income and risks over time.
  • Understand your levers. What must you spend versus what would you like to spend? Are you willing to live with less travel or eating out if there is a recession? Are you planning to spend less over time? 

Mr Chen says the average retiree spends about 10 per cent less per decade in retirement, so if you retire at 60, at 90 you are likely to be spending 30 per cent less in today’s dollars than you were at 60.

Consider whether you are willing to go back to work part-time if need be. Are you willing to move? Are you willing to use debt? For example, would you be willing to use a home equity line of credit or a reverse mortgage to bridge yourself in the event of a downturn?

Did you or do you expect to find retirement, when spending takes over from saving, challenging? What worked for you? What guidance can you offer?

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Janelle Ward
Janelle Ward
Energetic and skilled editor and writer with expert knowledge of retirement, retirement income, superannuation and retirement planning.
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