Accumulation
The "saving" phase
Decumulation
the "spending" phase
When thinking about working, about retirement and planning for the day you no longer work, think of it as a life-long mountain climbing challenge. The goal is to get up and over Mt. Retirement and safely down the other side. Climbing up is the accumulation phase, the ‘saving’ phase. It is what you do while you are working. With regularly scheduled savings, employer 401(k) match and a longer investment ‘time horizon’, the goal, the strategy for this phase is growth. It is about increasing the assets you will need in the 2nd part of the journey, getting ‘safely’ down the mountain. In the accumulation phase, going up, you can afford to take more risks because there is ‘time’ on your side. Time to recover the losses, time to re-gain and compound your growth. This longer time horizon also allows you to benefit from dollar cost averaging, by investing regularly, including the down markets, when prices are lower.
Decumulation
the "spending" phase
This is the time to implement your planned descent. The plan for the descent must be put into place before you ‘top out’, before you reach the peak of your saving years. With more time, more options and flexibility can be built in to ‘the plan’, creating more safety. This really matters as we cannot know exactly how the descent will go. Unexpected things can and will happen. The decumulation plan is the plan that will safely get you down the other side of that mountain. The decumulation phase begins when there is no longer a regular income stream to help increase your savings. It is time to change your focus to managing withdrawals effectively and efficiently to maximize your savings and investments. Now and over the next 25 years or so, it is about how to best support your lifestyle, provide security and peace of mind, about how to re-allocate assets to maintain spending power and never lose too much at the wrong time.
A word of caution; most retirees relax, thinking the hardest part is over once they retire. But it is a fact that most deaths and injuries, in mountain climbing occur on the way down. This is a greatly overlooked fact when it comes to the second half of the retirement journey. The risks are different and greater. Coming down is not the same as going up!”
~Tom Penland
THE FIRST PRIORITY IS...
… to determine where you are now, how much you are living on, or spending now, how much is that going to change, up or down once retired? Next, we focus on how to preserve hard-earned capital and establishing ‘foundational income’ sources to ensure a stable and sustainable stream of income exactly when needed, income that can last the rest of your life. Annuities, guaranteed funds, pay-out or income funds and reverse mortgages are some of the mainstream retirement investment products that can meet a retiree’s needs.
The Green Code
OUR FOUNDATION
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Thomas C Penland, RICP® | All Rights Reserved. All written content on this site is for information purposes only. Opinions expressed herein are solely those of Thomas C Penland, RICP® and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual financial professional prior to implementation. Insurance products and services are offered through Thomas C Penland, RICP®. Thomas C Penland, RICP® and Thomas Penland are not affiliated with or endorsed by the Social Security Administration or any government agency. This content is for informational purposes only and should not be used to make any financial decisions. Exclusive rights to this material belongs to GPS. Unauthorized use of the material is prohibited.