Yes but in a perfect world I would preserve my principal balance for the purpose of kids inheritance....
You're thinking about it the wrong way. The distinction between principal and interest vs. capital gains matters only for tax purposes. The only thing that is going to matter for inheritance is how much total money is in the account, no matter how it got there.
Think of it this way: you need to take out a certain amount of money each year to live on, right? You can do that any number of ways:
1. Keep everything invested as it is and sell shares periodically (added bonus that you can rebalance and/or tax harvest as you sell). This keeps your asset allocation the way you want it and gives you a chance to minimize taxes, but it makes you susceptible to swings in the market. The amount you don't sell will continue to grow and earn interest/capital gains until you die.
2. Buy enough bonds today to generate $80K/yr income. This will require taking a large chunk out of your investments at one swoop, which will both generate capital gains from the sale and generate taxable interest from the bonds, and will change your asset allocation to a more conservative balance. Ergo, it's not as tax-friendly, but it gives you a pretty damn high degree of security that the money will be there. The amount you don't sell will contrinue to grow/earn capital gains until you die.
3. Take a big hunk of your $$ and buy an annuity to cover you for the next 9 years. Same impact as option 2: big chunk gone now, so capital gains, along with taxes on the annuity payments over the next 9 years, plus more conservative asset allocation. The amount you don't sell will continue to grow/earn capital gains until you die.
4. Do a bond or CD ladder: buy bonds/CDs worth $80K per year maturing in 1, 2, and 3 years now. Each year, take the $ from the bonds/CDs that mature, sell enough of your investments to buy another group of bonds/CDs maturing 3 years out. This will require a somewhat larger withdrawal this year (since it's covering 3 years) but spread out the rest of the withdrawals over the next few years, until the last 3 years you can just take the $ from the maturing bonds without having to buy more since your other income sources will kick in. This gives you some tax flexibility on managing your investment sales, plus the ability to sit tight for up to 2 years in the event of a market crash, but it also generates interest from the bonds that you need to pay taxes on, and shifts your asset allocation to a slightly more conservative posture. The amount you don't sell will continue to grow/earn capital gains until you die.
5. You can readjust your holdings into dividend-bearing stocks and interest-bearing bonds so that your whole portfolio throws off $80K of dividends and interest every year. This shifts your overall portfolio a bit more conservative, triggers tax issues to the extent you need to sell stuff now, leaves you subject to market volatility and changes in dividend payments/etc, but it minimizes needs to change the portfolio every year (unless one of the above events happens). The amount you don't sell will likely continue to grow some, but not as much, because you are not reinvesting capital gains (which over time can seriously affect your returns).
Do you notice the recurring theme? You can sell a lot now, but that leaves less to grow over time; you can shift your investments into more dividend/interest-producing options, which avoids the immediate hit, but ensures that what's left grows more slowly over time, because now you're taking out the dividends/interests every year. Which, in turn, is fundamentally the same as just selling off shares every year -- you're still taking $$ out, thus leaving less in your accounts to continue to grow. What matters is your overall asset allocation, the taxes you pay, and how much you take out and when.
tl;dr: you should make your decisions on your desired asset allocation, need for secure income, and tax/income planning issues,
not whether the money you are living on comes from stocks, bonds, CDs, cash, or something else.