Unless you are one of the fortunate few who can live off your wealth before retirement, you should begin thinking about the decumulation phase of life. 

During decumulation, you will need to create a carefully laid-out plan to preserve your assets for the remainder of your life. Many people also want to leave a significant sum to their heirs and do not want to spend down their net worth.

As you consider the options for financing your retirement, you’ll need to think about your goals in life and whether they may necessitate dipping into your principal. A financial planner is adept at attaching cash flow projections to your goals and can translate your dreams and plans for retirement into a decumulation strategy.

“I frequently will do several budgets with clients,” said Anne Chernish, CFP® President & Managing Member of Anchor Capital Management, LLC, of Ithaca. “I will do their dream if they could do everything they want to do when they retire, and I will do a bare-bones budget.” 

If your plans entail living life pretty much as you have with no traveling or indulging grandchildren, perhaps you can budget as you normally have. Your planner will develop cash flow strategies that show if you can live off the income from your investments or if you must touch your principal.

Chernish said your planner can also program your retirement income, with projected income ranging from approximately 2 to 6 percent. 

“Higher return is always higher risk,” Chernish said. “If people want to be conservative, they should be looking at a 2-to-3 percent dividend income rate. If they’re willing to take risks, they can look at 5-to-6 percent. Or they may want a blend.”

If you need more, you must plan to reduce your principal, Chernish said. You can create your own private annuity with a strategy to utilize principal regularly. This strategy omits the need to purchase an annuity through an insurance company and preserves the opportunity to pass principal to heirs upon your death.

At Anchor Capital Management, LLC, we consider your need to understand the possibilities and the available options on the market and then work with you until you can accept the reality of yourself in the financial world. 

“We much prefer the understanding and strategies a client can develop to the simple resort of purchasing an annuity,” Chernish said.

If you’d like more information about planning the decumulation phase of your retirement, please contact Anchor Capital Management, LLC on our website.