There are various financial decisions that must be made in retirement. The most critical of all, and the one that has the strongest make-or-break effect, is the decision around your retirement nest-egg money. Once retired, your nest-egg money has to generate a lifetime of income that maintains your expected standard of living.
How do we actually pull income from these choices for retirement in the first place? Well, being in the business of actually helping hundreds of families do this, our belief from our experience is that the investment portfolio should be viewed as an income source on its own that supplements your other resources. It needs to have some kind of mechanism to control the amount of monthly paycheck flowing into your checking account to make up the difference between what you need and what you already have coming in from other resources.
The idea is that you want to adjust the flow from the nest egg to keep it just large enough that it keeps the checking account from either running out or filling up beyond a certain comfortable amount and “overflowing.” Keep in mind that there is a maximum amount that can be drawn from the nest egg as a rising monthly paycheck that, if exceeded, would cause the money to run out while you still need it, not to mention disinheriting those you may care about. This maximum is greatly determined by the investment choices we discuss here, about which investments held within the nest egg generate the earnings needed to sustain that income.