While many people focus on accumulating money for retirement, decumulating it during retirement can also be a challenge. This from an opinion piece in The New York Times.

It’s hard to know the right pace to spend at, because you can’t know for sure how long you’ll live, what obstacles you might face, or how the markets will perform. And flipping from saving to spending can be an emotional strain.

The article goes on to ask the three main questions you should ask yourself:

Do you keep your spending steady and allow your portfolio to fluctuate, or vice versa? The article recommends falling somewhere in between: keep your lifestyle stable, but be realistic enough to cut back a bit in years your portfolio is down.

Should you maintain a big nest egg, or convert your savings into a steady income stream? It can be a huge mental leap for consumers to turn most of their life savings into an annuity that pays out a monthly check. But it can be a big relief to have income for life – and there’s research to back that up, explains the article. The bad rap annuities have gotten for their high fees isn’t necessarily true anymore either; competition has increased quality, and decreased costs.

Lastly, how much risk should you take? For younger retirees, a certain amount of risk makes sense. But grasping for high returns to make up for years of undersaving isn’t smart. If you’re the kind of person who loses sleep when the market plunges, you’re better off in something safer.

It’s also wise to adjust your asset allocation as you age and security becomes more important, and to educate yourself. The article quotes personal finance expert Annamaria Lusardi: “In finance, ignorance is not bliss.”

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