7 Ways to Beat the Retirement Draw-Down Blues

BOSTON (MainStreet) -- Even as baby boomers march into the ranks of the retired, many are behind the ball in preparing for that inevitability. Complicating matters has been a recession, market volatility and staggeringly low interest rates.

More than 76 million baby boomers -- nearly 25% of all Americans -- are approaching retirement age in the next 20 years, making the transition from retirement saving to retirement spending. That shift from accumulation mode to a deccumulation phase is proving difficult for many. So much so that a recent survey by Schwab (SCHW) found that one-third of those who say they are just five years away from retirement have not even calculated how much income they will need in retirement.

Carrie Schwab Pomerantz, Schwab's senior vice president, has a focus on financial literacy issues that has given her insight on, and concern about, street-level investing behaviors.

"Flummoxed" is how those same researchers described nearly half of these soon-to-be retirees when it comes to how to invest money for maximized retirement income.

The findings may not come as much of a surprise to Carrie Schwab-Pomerantz, Schwab's senior vice president, whose focus on financial literacy issues has given her insight on, and concern about, street-level investing behaviors.

The Schwab survey suggests that "while the vast majority of pre-retirees express feelings of optimism about their retirement readiness," their outlook may be either filtered through rose-colored glasses or masking how they really feel. One-third said they have not yet determined their essential living expenses in retirement and 64% say they have less than one year of cash savings available for living expenses during retirement.

"A quarter of all Americans are retiring, and yet there hasn't been a lot of thought around decummulaton and maximizing income utilizing your various portfolios and income streams," Schwab-Pomerantz says. "It comes at a time when it's hard enough to save and build that portfolio, one of the most expensive things you'll ever do. There's so many aspects to decummulation, and we found that from our clients that coming up with a drawdown strategy for income was very complicated."

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"The bottom line is that transitioning into retirement mode is a very emotional time," she adds. "Saving for retirement is something most Americans know they have to do, but many people are confused, scared and literally frozen when it comes to flipping the switch from saving to withdrawing. Our data shows that people even just a year or two away from retirement don't know how to tap their savings effectively once they transition to retirement."

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