Ask us questions and get real answers.
Call Integrated Planning Strategies for a complimentary consultation to discuss your planning needs.
Building up a pot of money for retirement is done during the “Accumulation Phase.” Using that money for income would be the “Decumulation Phase.” Decumulation is a relatively new word which refers to funding one’s retirement. Decumulation is the process of converting pension savings to retirement income. Most of the funds set aside for retirement by individuals are generally placed into mutual funds, which are supposedly by design, diversified plans that take advantage of the growth of the market with some degree of safety.
The Decumulation Phase is where the real opportunity for failure can occur in most retirement plans. During the accumulation phase, while the markets always go up and down, the money added every year to the savings plan tends to help camouflage somewhat the downturns in the market.
Another larger problem is the returns on safer investments have gone down dramatically in recent years. The once thought of 4% rule (living on 4% of your money to make it last your lifetime) has now become the 2% rule!
In the Decumulation phase, three things tend to happen to compound the problem: