Accumulation and Decumulation: The two most important phases of retirement

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How do you build a better retirement future?

If you are a young, financially prudent individual (or approaching 65), one of your biggest concerns likely is how you will maintain a comfortable lifestyle after retirement. It may even be the main reason you’re visiting Aikido. How much should you invest at what age?

That’s why it’s critical to understand the two stages of retirement: accumulation and decumulation—and how to increase your odds of keeping your money during retirement.

The article describes the two phases of retirement planning and the key features of excellent planning to be implemented during each period. 

Let’s dive in. 

The accumulation stage 

The first day you enter the workforce and start putting money aside for retirement marks the start of the accumulation stage. 

The accumulation stage only ends when you actually retire.

It is mainly built from your earnings and contributions from your work. This stage allows you to build up assets to save and invest efficiently over time. 

Remember that your capacity to live comfortably throughout your retirement years will be determined by the money you saved, the investments you made, and the assets you accumulated during the Accumulation Phase.

As a general rule of thumb, younger investors should take on more volatility (risk) as it tends to yield higher returns and with a long term time horizon, you can weather the storms. Old investors, on the other hand should invest in less risky assets as if a single big downturn occurs it could half the amount in their retirement portfolio.

The strategies on Aikido Finance are geared towards investors who are still a while away from retirement and seek higher returns. Though they can also be used by older investors, just as a smaller portion of their overall portfolio.

A real-life example of the accumulation stage 

Assuming you begin to save at 30, the accumulation phase can be 35 years, depending on when you choose to retire. If you’re like most people who retire at around 65 years and live in a country where the average life expectancy is about 80-90 years, then you have a 20-year distribution period.

To obtain a better payoff towards the end of the accumulation phase, you might be better positioned by focusing on efficient investment techniques. The accumulation phase is similar to creating the foundation for a two-storied house, and portfolio growth is determined by how effectively you laid your foundation. 

The decumulation stage

Decumulation, on the other hand, is the act of transforming a retirement portfolio into a regular flow of income and services after retirement. 

The decumulation stage allows you to choose a longevity insurance strategy that determines the arrangements you may take to guard against longevity risk, to ensure you do not outlive your retirement portfolio, and a withdrawal strategy.

Here are some money management tips to guide your journey through the two stages of retirement. 

Top Money management tips for retirement 

  1. Shift Your Focus

You’ve been in a rigorous accumulation phase for years, hearing that you shouldn’t spend, but now that you’re either approaching or have started retirement, you need to modify your viewpoint. 

To live the retirement you want, you may have to spend some of your savings. 

Tip: Draw a plan that empowers you to spend without going overboard.

  1. Apply a defensive mechanism to money

It’s crucial to take a cautious attitude toward money. Make sure you have an emergency fund, so you’ll be prepared if you need cash during a downturn. 

TD Ameritrade’s director of retirement and annuities, Matt Sadowsky, recommends shifting focus to principal-protected investments such as annuities. 

Annuities, he argues, may be an excellent strategy to protect cash flow while other parts of your portfolio increase faster. Bonds and other fixed-income instruments can provide investors with a steady income stream while also being less risky than equities.

However, annuities are not for everyone. They are often considered old-fashioned and a poor investment vehicle. And alternative might be to look at corporate bonds with a high S&P / Moody’s Rating. In any event, this is the very low risk, solid income portion of your portfolio.

  1. Acknowledge the compromises you make to achieve your goals

Now that you’re retired, you must strike a balance between your desire for full retirement and the necessity to cope with crises by maintaining liquid assets, as well as the possibility of leaving a legacy. 

Recognize that you may have to make trade-offs in retirement. Whatever retirement stage you’re in, it’s critical to keep track of where your money is going and how much you have left.

Tip:  Define your priorities and devise a plan that will assist you in managing your finances and making the best trade-offs for you.

  1. Targeted asset allocation

Allocate your assets according to when you’ll need to spend the money with a bucket strategy. Money you need sooner is generally put into lower-risk investments, while money you won’t need for several years is kept in growth assets until it’s time to reallocate.

Tip: decide whether some of your assets will need to continue to grow even if you use some of your savings.


You must have a good grasp of the differences between the accumulation and decumulation stages of retirement to implement investment strategies tailored to your specific needs.

If you’re new to the world of finance and investment, Aikido can help on how to get started. Build a portfolio in less than 5 minutes using automated investment strategies.

What are your key takeaways from this article?

Share your comments below.

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