Step #1: Develop A Spending Plan

Pre-retirees with a plan to responsibly spend their money in retirement are more than twice as likely to feel confident about managing their financial security compared to pre-retirees without a plan (57% to 26%). Similarly, retirees with a spending strategy are much more confident about their retirement finances as those without a strategy (55% to 29%).

“Decumulation” is the technical word for a plan to spend your savings in retirement. Such a plan includes building a portfolio of lifetime retirement paychecks that includes Social Security benefits, pensions, annuities, and systematic withdrawals from invested savings. A systematic withdrawal plan would specify how your assets are to be invested and set a target amount of money you’d withdraw each year that is designed to last the rest of your life.

Unfortunately, less than one in three pre-retirees (29%) have a such a plan. On the other hand, more than three in four retirees have a plan for managing and spending their savings in retirement. One downside: These plans often have a heavy focus on investing, but there’s a lot more to a decumulation plan than investing. Such a plan should also include when to start Social Security benefits, when to retire, whether to work part time for a while, and whether to buy a guaranteed lifetime annuity.

Developing a decumulation plan is often beyond the expertise and experience of most people. Heck, it might as well be brain surgery! And that leads us to the next step.

Step #2: Work With A Financial Professional

By far the top choice for assistance with managing investments and spending in retirement is a financial professional (61% of pre-retirees and 58% of retirees chose this option, according to the Corebridge survey). Those who work with an advisor are much more likely to feel confident managing retirement money to provide income for life compared to those who don’t (48% vs 31%, according to another study by Corebridge).

However, according to a story in Investopedia, fewer than half (45%) of pre-retirees age 50 to 64 work with a financial advisor, and barely more than half (51%) of retirees work with one.

If you’re not yet working with a financial advisor, one of the best uses of your time can be to shop for a retirement advisor who’s trained in the nuances of decumulation strategies and puts your interests first, acting a fiduciary on your behalf.

Step #3: Consider Buying An Annuity

Nearly three in four respondents to the Corebridge survey report that having guaranteed lifetime income in addition to Social Security would positively impact their ability to spend money on things that make them happy. For example, 61% of retirees report that having more guaranteed lifetime income would lead them to increase spending on travel.

“Turning some of those hard-earned savings into a stream of income that lasts as long as you do can be a route to a more grounded, happier retirement all around,” says Jean Chatsky, the well-known financial author and researcher who collaborated with Corebridge on the study reported here.

One common objection to buying an annuity is that they can be expensive. However, with any important purchase you might make, you can find good deals but also options that are better to avoid. This brings us back to Step 2: Work with a financial professional who can help you decide if you would feel more confident about your financial security with an annuity and also help you find a fairly priced annuity that best meets your needs.

While there can be more steps you can take to make you feel financially secure in retirement, the three steps here are a very good start. So do the work that’s necessary to plan for your retirement security, then go enjoy your hopefully long retirement.