Word of the Week: Decumulation

This week’s word of the week is decumulation, which refers to the use of money from a pension to fund your retirement.

“Decumulation” is a term used in personal finance to describe the phase where an individual starts to withdraw and spend the money they have saved during their working years.

This period begins after retirement when regular income from employment stops. 

During the accumulation phase, people focus on saving and investing their income to build a financial reserve.

In contrast, the decumulation phase involves careful planning to ensure that these savings last throughout retirement.

This planning includes estimating living expenses, managing withdrawals to balance income needs and capital preservation, and considering tax implications. 

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Effective decumulation strategies are crucial for maintaining a desired lifestyle in retirement and managing risks like market fluctuations, longevity, and healthcare costs. 

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