The transition from accumulation to distribution with IRA’s and 401k’s

success1Transitioning from “Growth & Accumulation” to “Preservation & Distribution”

  • Common Question: “Do I need to change my investment philosophy when I start getting closer to retirement?”
  • Answer: In our opinion, that depends on what your income situation will be, after you stop working.

Let’s dive into this one a little bit and talk about it in a simple way.

I’ll divide people into 2 categories.

CATEGORY 1: People with substantial pensions

If you will be getting a substantial pension (that will cover your expenses) when you retire, then you don’t really have much to worry about. (Assuming the pension fund is safe). You know you will get your check every month.

From our experience, people in this category can continue to invest in whatever way they are comfortable. Really conservative or really aggressive or anywhere in between.

You can watch your investments go up and down in value without freaking out too much because you are not relying on those assets to provide your basic income needs.

CATEGORY 2: People who “DO NOT” have a substantial pension and will rely on their 401k or IRA for extra income when they retire.

This category is where problems arise and where people need help.

This category NEEDS to get income from their investments. (IRA’s, 401k’s etc) to help supplement their Social Security income when they retire. They don’t have a choice.

Because of the INCOME NEED, this category must change their thinking. Avoiding “Portfolio Failure” during retirement is crucial. If you fail at this you go broke, or have to seriously reduce the quality of your retirement.

At some point it stops becoming  the ACCUMULATION mindset you had in your 30’s, 40’s and 50’s and becomes a PRESERVATION and DISTRIBUTION mindset that will carry you through your 70’s, 80’s, and 90’s with the smallest amount of anxiety.

Getting Security, Consistency and Predictability from a Disciplined Approach to income planning, helps a lot.

“You should not use investments that go up and down in value to provide you with the income you need to meet your expenses in retirement”

For more on that read “Why Reverse Dollar Cost Averaging Can Leave You Broke During Retirement”

If you need income, set it up right. Look for something with an exceptional record for providing retirement income, that still leaves you in control in case your needs change down the road.

To learn a little more about an innovative approach that is working for a lot of people right now, take a few minutes and watch the video on this page. “Paycheck For Life”

Warmest regards,


Speak Your Mind