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Accumulation vs. Decumulation in Retirement

August 15, 2022 Steve Zuschin By Steve Zuschin

Clients often experience a change in their financial perspective when they retire. Now that they’re no longer part of the workforce and earning a steady paycheck, they must shift their focus from accumulation to decumulation. It’s the financial advisor’s job to help them navigate this change in life.

Accumulation describes a phase of an investor’s life that, financially speaking, is focused on saving and investing – in stocks, mutual funds, property, and other assets – to build wealth for retirement. The earlier they start – and the more disciplined they become – accumulating assets, the greater their chance of success.

An excellent financial advisor also knows this and works hard at getting clients into an accumulation plan early on once they’ve started working and receiving paychecks regularly from their job. This way, their clients can get ahead financially and emotionally and not have to endure the hardship and stress resulting from poor planning.

As Warren Buffet said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.”

Decumulation typically starts at the point when people retire and begin drawing from their saved assets and investments. Depending on their financial situations, this period may also see them start to modify the lifestyles they were used to, allowing them to live comfortably without fear of running out of money.

Think of decumulation as converting retirement savings into regular income needed to support a sustainable lifestyle for many years after leaving the workforce. Decumulation planning should consider the growing need for financial support in people’s later years. If they have spent too much money early in retirement, they may find themselves in a bind later.

Investing for Wealth Accumulation

Time is one of the greatest assets an investor has. Starting a retirement fund early allows individuals, no matter their means,  to take a long-term approach knowing that they’re managing their risk and giving themselves time for success before retirement.

The average investor feels more capable of handling the risk inherent to investing during the accumulation phase. Markets have ebbs and flows, but history has generally proven that they provide solid returns and positive results over the years. The savings pattern referred to as “dollar-cost averaging” is an excellent option for anyone investing for retirement – and one that financial advisors should encourage in their clients.

Dollar-cost averaging involves investing a predetermined amount in a target account – think 401(k) or individual retirement account (IRA) regularly, regardless of price and market fluctuations. Market timing is generally fraught with peril for the average investor. Dollar-cost averaging ensures that people are invested when the market dips – taking advantage of buying more shares at a lower cost – and when it rises – benefiting from the price increases.

In other words, it’s to investors’ advantage in their accumulation phases to:

Financial advisors play a significant role in schooling clients about accumulation, the opportunities available for wealth accumulation and how financial planning can help them strike a path toward a secure retirement.

Investing, Decumulation & Retirement

Opinions will vary when investors should retreat from the vicissitudes of the stock market and pull their assets into less risky, income-producing investments. But lifespans are longer than they used to be. People who retire at 65 may reasonably expect to live 25 or 30 years. And many people don’t retire at the traditional age anymore, staying on the job well into their late 60s and sometimes early 70s.

So, retired individuals must take strategic risks to maintain their desired standard of living and be prepared should they need to decumulate their assets over a long period.

Today, people face three significant risks in their decumulation phase: inflation, longevity, and risk. Financial advisors play essential roles in helping their clients understand these and be prepared to surmount them.


As of this writing, inflation has hit a 40-year high. Disruptions to the economy from the COVID-19 pandemic are some of the critical factors behind inflation. Prices for food, fuel and healthcare affect everyone, particularly retirees who may have planned their spending based on lower prices than they are now paying.

Financial advisors can step in to help their retired clients adjust their budgets and their investment plans with options such as investments that will provide fixed income. Advisors also need to counsel their clients who haven’t yet transitioned to decumulation:


Not only are we living longer, but our financial needs are also increasing. For clients to create and sustain a comfortable lifestyle in retirement, they must work with financial advisors who emphasize planning, tax-efficient investing and tax-smart decumulation strategies.

Today’s retirees are generally aware that their life expectancy may be higher than it was for their parents, notwithstanding some recent dips due to the COVID-19 pandemic. They may have witnessed their parents’ financial peril in retirement (in some cases, they may still be caring for parents in their 90s or even their 100s).

Financial advisors should be sure to turn that knowledge into clients’ resolve to:


One of the first things financial advisors do when they engage with a new client is to have that client answer a range of questions about their goals, timelines and comfort with risk. Their answers help advisors recommend solutions.

When the market is doing well, everyone is happy. When it heads south, perhaps into bear market territory, you can almost feel the jitters over the phone calls or emails that advisors get from their clients.

One thing to do, of course, is return to the financial plan. Have the clients’ goals or timelines changed in any way? How about their view of risk?

As investors approach retirement, they are inclined to “lock in” returns and place assets in investments with low risk and perhaps even income guarantees. But some near-retirees may not have accumulated enough to make their decumulation phase bullet-proof.

For them, it may be necessary for advisors to recommend they continue to have some market exposure to generate returns for 10 or 20 years from now.

How LifeYield Helps with Accumulation & Decumulation

LifeYield is a technology company that improves investor outcomes by minimizing investment taxes and maximizing retirement income throughout the accumulation phase with tax-efficient investing and the decumulation phase of investors’ lives.

LifeYield does this by offering financial services firms access to features in its library of application programming interfaces (APIs) to boost tax alpha through:

Major financial services firms integrate LifeYield APIs with their proprietary platforms. Those firms have increased advisor productivity and improved financial results for investors, advisors, and firms by up to one-third.

Steve is the EVP of Advisor Success at LifeYield. He's responsible for leading our Direct-to-Advisor channel and always keeps up on the latest advisor technology. Steve writes about how advisors can grow their business by building stronger relationships with clients and adopting new technology.