Accumulation vs. Distribution
June 26, 2025
Even if your buildup to retirement has gone according to plan, there is still more work to be done. A major change in retirement can come in the form of income and expenses shifting drastically from the norms established during your working days. This does not have to be a cause for concern. However it does need to be considered with the same attentiveness and care taken while building up your retirement nest egg1.
Transitioning from the accumulation stage of retirement planning to the distribution phase marks a significant shift in financial strategy and mindset. During the accumulation stage, the primary focus is on saving and investing. As you move into the distribution phase, the emphasis shifts from growing your assets to managing and preserving them while generating a steady income stream.
Withdrawal Strategy
One of the key changes is the need to develop a withdrawal strategy. This involves determining how much money you can withdraw each year without depleting your savings too quickly.
Tax Implications
Another important consideration is the tax implications of withdrawals. During the accumulation phase, contributions to retirement accounts may have provided advantages, such as tax deferrals. However, in the distribution phase, withdrawals from traditional retirement accounts are typically subject to income tax. It is crucial to plan for these taxes and consider the order in which you withdraw funds from different accounts to minimize your tax burden.
Healthcare Costs
Healthcare costs also become a more prominent concern during the distribution phase. It is essential to plan for potential medical expenses, including long-term care, which can be significant. This might involve purchasing health insurance or long-term care insurance to preserve your savings.
You worked hard on a plan to build and save for retirement. A similar strategy is important to build the confidence to enjoy that retirement once it has begun. Our team of experienced professionals is available to talk with you. We can help you with any questions – whether you are currently dealing with a sudden change or just looking to confirm that your plan is still aligned with your goals. Schedule today!