Phases of Retirement

Phases of Retirement Planning

The challenges you are up against in retirement are very different than what previous generations experienced. Because of longer life expectancies, inflation, taxes, and market volatility, retirement planning has become more important for consumers. Even those individuals that plan early can face these issues, especially if they have too much of their retirement assets exposed to the market.

The main objective of retirement planning is to reduce risk while accumulating a sustainable source of income that gives you financial independence. Since time is such a significant factor in retirement planning, you should ideally begin the planning process as early as possible. There are three basic phases of retirement and income planning. They are accumulation, preservation, and distribution.


During the accumulation phase, you should look at the many different ways you may be able to accumulate retirement funds. This can include looking at financial products, savings accounts, alternative investments, and more—really whatever is appropriate for you and your risk tolerance. Some solutions, such as cash value life insurance, and annuities can accumulate funds tax-deferred, meaning that your growth compounds more before facing a tax liability. This process will usually start with an assessment of your current assets, income, and your readiness-to-retire based on your ideal retirement lifestyle. This is also a time to consider taking advantage of employer-sponsored retirement programs, such as 401(k) and IRAs.


The preservation phase often starts a few years preceding retirement. During this phase, you should evaluate your risk tolerance, retirement plan performance, and changing financial needs. You should also be aware of what, if any, tax liabilities your assets will face once you trigger distributions. You may find that is to your advantage to convert a sum into a certain financial product or that delaying certain accounts can increase your overall retirement resources. You should also evaluate how your assets are structured.


During the distribution phase, you begin to draw on your retirement income. You may have completely transitioned into retirement or continue to work in a limited capacity. As you take distributions, you’ll want to consider if the resources still match your retirement needs. No matter what phase you are in, regular review with a financial professional is crucial in ensuring a sustainable and financially independent retirement.

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