Making Your Post-Working Decumulation Strategy Personal and Comprehensive
Updated: May 26
By Robert B. Dunn, CFP®
“Retirement is a time to do “what you want to do, when you want to do it, where you want to do it and how you want to do it.” -- Catherine Pulsifer, author, motivational speaker
The shift from relying on human equity to portfolio equity is not easy for many. It pays to plan ahead.
Your post-working life is not just about solving a math problem; it’s filled with emotional and motivational challenges—and opportunities.
This simple exercise using your last six months of bank statements can help you see what you’ll need in retirement.
According to government data, the U.S. retirement rate among those age 55-64 rose during the pandemic, reversing a decades-long trend of gradual decline. A wide variety of factors contributed to this shift, but economists singled out job losses and business closings during the pandemic, on top of home prices and stock market values rising dramatically. These seismic shifts put many affluent older workers in much better position to retire than ever before.
Is now your time?
There are many psychological elements that are important to consider when transitioning from employment to exploring the post-working “chapter” of your life. The most obvious is going from wealth accumulator to gradual wealth de-cumulator. It’s about going from a reliance on your human equity to a reliance on your outside sources. But it is important to consider the non-financial elements. Do you have a purpose now that you’re no longer going to the office? Do you have a new identity that’s not associated with your job title or business? Have you taken steps to ensure that you’re making a smooth transition into the next chapter? Is your spouse onboard with your post-working plans? This will be a big transition for him or her as well—and money is just a small part of the equation.
As author Ella Harris once quipped: “A retired husband is often a wife's full-time job.”
I know these questions are not easy. But if you don’t address them pre-transition, you may be in for a shock when the working chapter of your life comes to a close after 30, 40, maybe even 50 years of going to work every day to provide for your family and to build your career. Suddenly, the kids are grown, the mortgage is paid off, the last big tuition check is about to be mailed and you’re asking yourself: “Holy cow, where did the time go. What do I do next?”
That’s exciting for some people; unsettling for many others.
Fortunately, there’s a huge world out there just waiting for you to explore. And for the first time since college, you’ll have time to explore yourself inwardly. That may be scary for some, but with the right planning, you’ll have plenty of time and resources to reinvent yourself and embrace something new.
We’re here to help you every step of the way.
When you’re thinking about this potential transition, take a step back and ask yourself: “How did I get here, and could I have done anything differently?” If you feel good about your answer, then you have likely been thoughtful and proactive about planning your life post-work. However, for even for some highly motivated people, inertia has dictated their path when it comes to “What do I do next?” They can’t seem to get started. In either case, it is incredibly valuable to visualize and what the next chapter of your life can look like. Most of us wake up every day with a purpose and identity when we are in our working years. But the moment you become financially independent and no longer need to work to meet your financial needs, you can finally start writing the next chapter of your life story. Notice how I don’t use the word “retirement” in this post. As a society, we’re living longer than ever. Many people have three, four, even five fulfilling decades of life ahead of them after they close the working chapter of their lives. This is the time to enjoy your financial independence. It’s the time to pursue interests you’ve never had the time to pursue because you were so concerned with building your career, saving adequately, and meeting your family’s basic needs.
Once you have reflected on the emotional aspects of your post-working life, you should be ready to evaluate the financial aspects. Ask yourself if you feel good about all the things you have worked so hard to have accumulate—money, possessions, investments, etc. To they make you feel good about yourself or are they just a source of angst? If you feel good about your accumulations-- and it will require additional resources to maintain them--then it makes sense to keep working (and accumulating) for a while longer. But, if I don’t feel good about what you have accumulated, then you must ask yourself if what you have is enough--and if you are willing to make adjustments. I know it’s not easy.
Self-assessment: How much can we take out of our nest egg in post-working years? This is a tough question that we spend a great deal of time helping our clients reconcile. There are so many variables to consider when it comes to maximizing your resources post-work. But it all starts with a simple formula: Spending less than you earn! Since you are no longer earning, you need to review your spending plan carefully. Try this simple exercise: Take out your bank statements for the past six months. Write down your starting balance, your deposits, your withdrawals and ending balance. If you see that more money is going out each month than is coming in, you may have some cash flow issues when you reach retirement. It only takes a few minutes each month to complete this exercise. By doing so, you will have your own form of “escrow.” You’ll learn to anticipate your high and low spending months which can help you plan for the variability in your spending.
We have helped hundreds of successful couples and families unlock this puzzle. There are so many unknowns when you think about the lifestyle you want to live in your post-paycheck years.
Remember, it’s not just about meeting your basic living expenses, vacations and routine repairs; it’s about covering those larger unknowns 10 to 15 years out, such as major medical or long-term care.
You are likely to think about the financial impacts of giving up your current income in contrast to the immediate benefits of stopping work (such as less physical effort, less commuting and more leisure time). However, there are also emotional costs to transitioning to your next life chapter since leaving your job can cause boredom, loneliness and loss of identity without having a job to go to every day. It is important to take those costs into account. There’s only so much golf, sailing and traveling you can do. And even then, close friends and family members may be too busy with their own lives to join you in those pursuits.
"My favorite things in life don't cost any money. It's really clear that the most precious resource we all have is time." – Steve Jobs
Every day we make a choice: We can keep running on the hamster wheel, or we can jump off and slow down a little. Or we can find another more exciting wheel to jump on? The choice is yours.
“Don't act your age in retirement. Act like the inner young person you have always been.” – motivational speaker J. A. West
If you or someone close to you is concerned about their retirement readiness, please contact us any time. We’re happy to help.
ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth