QUESTION:

I have a big retirement fund, so why don’t I feel secure now that I’m in retirement?

ANSWER:

Retirement can be difficult for productive people who have been saving and investing most of their lives. Taking money out of savings, instead of putting it in, feels irresponsible. It can take several years to get comfortable. Fortunately, planning helps.

The first step is to figure out what’s your life endowment — the amount of money needed for living expenses over the rest of your life. If your life endowment is $5 million and you have $8 million, that’s great news. Not only do you have extra, but the excess is likely to grow over time, and you can plan how to allocate these legacy assets. Will you use the funds to help your family, the community or your alma mater?

The question is harder if you need a $5 million endowment and only have $4 million. How do you make up the deficit? You could work for a few years and allow the assets to grow. But if working is not an option, you have more difficult decisions to make.

You can cut back expenses, so you need less of a life endowment. But that could leave a significant amount unspent. That might be great news for your heirs, but you may miss out on great life experiences.

Another alternative is to follow a glide path, slowly spending down your assets to a pre-determined floor before you cut expenses. It allows you to live a fuller life while you are able. Having a plan in place and monitoring it provides the courage and comfort that, while the assets may decline, you will never run out.

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