There are many people of retirement age who are looking at their nest egg — they’ve come into some cash (whether from downsizing the house, cashing in KiwiSaver, receiving an inheritance, or selling the business) and are now dealing with the biggest amount of cash they have seen in their lives, and ever will see — they know there is not another egg in the nest!

This is all the money you are ever going to have — you have to use it well because, if you mess it up, you are not going to go back and spend another 40 years to hatch another.

What do you do with the money you have planned to give you the retirement you want? How do you take an income? How long will the money last?

After all, you have spent years sitting on your nest egg, caring for it, and hoping that it will grow. However, there comes a time when all care is put aside, and you have to take a hammer to it and crack it open.

The wave of baby boomers is now cresting and breaking into retirement. Long predicted, this tsunami is now with us and is rolling up on a beach seemingly bare of investment options. In fact, the baby boomers, who still complain about paying 20+ percent on their mortgages in the 1980s, now find themselves trying to fashion a living from their savings at exactly the time interest rates are at record lows. At the same time as interest rates are low, we have very highly-priced shares and property with poor dividend and rental yields.

We have a problem: baby boomers were always told they needed to save for retirement. By and large, they did this, and many have now got to retirement age with nest eggs of varying size (most likely the amount will be around $250,000). However, regardless of the final amount, they have arrived at retirement at a time when investment looks anything but easy — interest rates are still historically low, and they have few ideas on how these nest eggs might usefully give them a retirement income safely.

Most of the financial literacy effort has been on teaching how to build a nest egg rather than how to use that nest egg for income.

In my investment advisory practice, I have seen multiple examples of poor investment behaviour. As a response to the pinch that these new or prospective retirees find themselves in, some have adopted a strategy of putting all their money in just one asset, for example they have purchased a rental property or continued to own a business. This means that they are not diversified but instead have concentrated their funds to just one asset class. And some are not having the retirement of their dreams. They stay on in the business as they kick the retirement can down the road, to pick it up (maybe) another day.

Others have ratcheted up risk by having portfolios with more shares than they ought; with returns from bank deposits and fixed interest investments virtually non-existent, they have turned to asset classes (shares and listed property) which look expensive but are at least doing OK for the time being. Repeatedly, I see people abandon balanced portfolios for growth portfolios and funds with less fixed interest and cash, but more shares and property.

Still others have simply held on to their term deposits, regardless of the paltry returns. The minimal returns they have been getting from the bank mean that to maintain any reasonable kind of lifestyle they are required to spend more capital. This, in turn, means that they run the risk of the money running out long before they do.

Of course, many people look at their options and, shunning retirement, carry on with work. That seems safer than putting their dearly beloved nest egg at risk.

To many retirees, accumulation of wealth was easy; it is the decumulation that is now necessary that is the hard part.

This edited extract is from Cracking Open the Nest Egg by personal finance expert Martin Hawes. The book sets out to help people with the way they should invest when the nest egg has hatched, and how they draw down from their savings to give a good retirement.The book is available now where all good books are sold ($39.99 RRP, Upstart Press). Buy it here.