Frederick Vettese - Retirement Income for Life

My first lesson in spending came at the age of four, when I frequently took money out of my mothers purse to buy candy at the local convenience store. (How I got to the store on my own is another story.) Sometimes it would be just a nickel or a dime, but I wouldnt hesitate to grab a five-dollar bill if there was no loose change.

I didnt get away with it, though. My mother or father would get a call from the store saying that little Freddie had come in to buy a five-cent chocolate bar. They would tell the store owner to give me what I wanted and send me home.

My older brother, who was all of six at the time, cautioned that if I kept up my profligate ways, the family would run out of money. There is no evidence that I heeded his warning, which frankly sounded a little alarmist to me even then. Nevertheless, my parents eventually made their money less accessible, which put an end to my shopping expeditions.

I learned two things from this experience: First, it is easier to spend someone elses money than ones own, a privilege I have rarely been able to repeat since age four. Second, I needed a better strategy if I wanted my spending to be sustainable. This book offers such a strategy, though it is geared more for retirees than for four-year-olds.

Drawing down ones savings in retirement is something very few retirees do well, even with the help of professional advisors. Some retirees outlive their money. An even greater number systematically underspend for fear of outliving their money. And many retirees from both camps waste a substantial part of their wealth by employing inefficient drawdown strategies or spending more than necessary on investment fees.

There are several reasons for this sorry state of affairs. First, drawing an income from ones savings was not a mainstream issue until recently. Most of the retirement planning literature to date has focused on the task of accumulating money rather than decumulating it. Even the latest robo-advisors, which automate investing (more on this in Chapter 27), seem to be more focused on helping people build their nest eggs, not spend them. With over one thousand Canadians turning 65 every day, however, the cultivation of good decumulation practices has become an urgent matter.

Second, it seems nobody wants to see retirees drawing down their savings certainly not the financial advisor who takes a percentage of their assets each year. Nor do retirees children, who might fear that they will (a) receive no inheritance or (b) have to support their aged parents in their later years. As for the person who is most aggrieved at seeing wealth diminish well, its the retiree. A declining account balance makes one feel financially vulnerable and this becomes an ongoing source of existentialist angst. As I note in Chapter 12, drawing down ones assets in retirement is a stark reminder not only of our dwindling influence in this life but also of our own mortality.

If you have significant savings, I have no doubt that the strategies described here will put you in a stronger position to cope with another financial meltdown such as the one we experienced in 2008, or the one that may be unfolding in 2020. Even if the capital markets behave themselves in the years to come and lets all hope they do you can still look forward to more income with less anxiety.