How Does a Decumulation Strategy Work?

February 5, 2023

In this highlight, we discuss how the decumulation strategy works.


Decumulation, the process of withdrawing funds from your retirement accounts, can be challenging and requires careful planning. Unlike accumulation, which can be approached with generalized advice and rules of thumb, decumulation is unique to each individual and requires personalized strategies.

It’s not uncommon for people to ask why we don’t talk as much about decumulation as we do about accumulation. The reason is simple – decumulation is much more difficult to talk about in a general sense. It’s customized to every individual, and there’s no one-size-fits-all solution.

When it comes to decumulation, everyone is different. Some people have a high percentage of after-tax assets, while others have most of their wealth in tax-deferred accounts. Some people have no cash flow from Social Security, while others have a large pension. The point is, everyone’s retirement structure is unique, and there’s no single strategy that will work for everyone.

When it comes to decumulation, the general rule of thumb is to work in reverse. Most people start by funding their tax-free accounts (Roth) first, then their tax-deferred accounts, and finally their after-tax accounts. However, this is just a general rule and doesn’t always work out the same way for everyone.

To maximize your potential, it’s important to work with a personal CFO or a financial advisor who can help you make the right decisions. With their experience and knowledge of the pitfalls and traps, they can help you navigate the decumulation process and make sure you’re doing it in the best possible way.

Decumulation can be a challenging and complex process, but with the right strategy and personalized approach, you can ensure a successful and comfortable retirement. If you have many questions about how to do it in the best possible way, you are a perfect candidate for a financial advisor. They can help you maximize your full potential and ensure that you have a happy and worry-free retirement.



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