Decumulation is not a word that is familiar to most people, but it is one every retiree has to live with. Decumulation is the stage in life when you stop accumulating assets and begin to unwind them. An example is when homeowners decide to downsize to a condo or apartment from their family home.
When it comes to money, decumulation is the point at which you stop saving and start spending your nest egg. How well you cope will go a long way to determining how happy you feel about your post-earning years. Although you don’t have to start spending like a rockstar, at some point you’ll have to start dipping into your retirement savings and we’ve rounded up the top four tips for how to spend wisely in your retirement:
- Don’t withdraw more money than you need.
Create a budget that estimates how much money you’ll need each year to maintain your lifestyle. Calculate how much you’ll require after taking into account CPP, OAS, and any other sources of income you have. The difference will be the amount you need from your RRIF, LIF, defined contribution pension plan or whatever saving plan you have.
If you are looking for help with your budget or financial planning advice, contact The RaeLipskie Partnership.
- Reduce investment risk
If you remember the 2008 stock market crash then you know that years of savings could be gone in an instant. Risks can be reduced by increasing the proportion of fixed-income securities in your account (bonds, GICs, etc.). These securities do not pay out big amounts, but if the stock market plunges you’ll be thanking yourself that you bought them.
- Reduce your costs
If you aren’t part of a group plan this is easier said than done, but there may be cost savings by moving to a fee-based account. Contact your financial adviser at the RaeLipskie Partnership for a quote. The more money you have invested, the lower the fee should be.
- Have a bond ladder
Don’t put yourself in a position of having to sell securities in a falling market because you need money. Maintain a bond ladder that is equivalent to at least one full year of withdrawals to stay on the safe side.
If you’re a client, contact your advisor and let them know about your retirement goals. If you want to learn more about working with us for financial planning into retirement or creating an investment portfolio, contact us.
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