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3 Wealth Phases of Retirement Planning

The financial journey of retirement planning consists of three distinct wealth phases.

Managing these 3 phases properly is the secret to a financially secure retirement.

Each of these phases involve varied emotional and practical challenges.

The better you understand these challenges, the better you can adapt to go through them.

What are the 3 Phases of Wealth in Retirement Planning

The three phases of wealth in retirement planning are wealth accumulation, wealth preservation and wealth distribution.

They correspond with the pre-retirement, retirement transition and post-retirement stages of your life.

3 wealth phases of retirement planning

Wealth Accumulation Phase

The wealth accumulation phase is most straightforward financial phase of retirement planning.

It is primarily about saving money from your monthly income.

Thereafter, investing the money you save to make it grow in the best possible manner.

The focus of this phase is accumulating wealth using low cost, tax efficient investment options.

There is a lot of information available online as well via traditional media on how to go about it.

Most articles and videos you will see for retirement planning are focused on this wealth accumulation phase.

Your asset allocation during the wealth accumulation should be tilted towards assets with potential for growth like stocks.

This helps you to accumulate significant wealth over a decade or two.

During the early part of this wealth accumulation phase, how much you save is more important than the returns generated by your investment choices.

In the latter part of the wealth accumulation phase, the performance of your specific investment choices start to play a bigger role in wealth generation.

A sharp focus on saving and investing during this phase can do wonders for your retirement corpus.

It can even offer you the opportunity to retire early from your job.

Wealth Preservation Phase

Wealth preservation aligns with your retirement transition phase.

Once you have acquired sufficient wealth during the wealth accumulation phase, you transition to the wealth preservation phase.

The primary objective during this phase is to secure the wealth you have already amassed.

Trying to grow your wealth even further becomes a secondary objective now.

Time is no longer on your side now. You don’t have many years left should a serious financial set back occur.

Therefore, it is important to change your wealth mindset from accumulation to preservation. It is time to stop playing the game if you have already won.

Your asset allocation should reflect this change in the wealth phase. Your retirement portfolio takes on a more conservative approach.

It can be emotionally challenging to give up on growing your retirement corpus aggressively.

Any such temptation needs to be resisted.

There will continue to be new investment products or market developments that will tempt you to get more aggressive with your asset allocation.

Turn your focus to financial contentment and your near-term goal of retirement to avoid any such distractions.

Wealth Distribution Phase

Wealth distribution is the third and final phase which is also sometimes referred to as the wealth decumulation phase.

The is the stage that kicks in after you leave your job and your regular salary stops coming in.

More commonly this is known as the retirement phase of life.

Your wealth mindset now needs to shift from a saving to spending mindset.

It is easier said than done though.

If you have been saving and accumulating wealth for decades, it can become part of your personality.

It takes a lot of conscious work while working with your spouse or a financial adviser to switch to a spending mindset during the wealth decumulation phase.

During this final phase you need to generate a regular income stream from the wealth you have generated over the previous two wealth phases.

This income stream funds your lifestyle expenses during your retirement years.

Developing an income stream from your accumulated wealth is part science and part art.

The right solution depends on your personality as well your unique life situation.

Below are the typical characteristics of this phase:

Lack of Information

While there is tons of information available for the wealth accumulation phase, the same cannot be said about the wealth distribution phase.

Most financial companies and salespeople focus their efforts on the wealth accumulation phase.

This is reflected in the number of choices in mutual funds, insurance, and other products to grow your wealth.

The more assets you accumulate the more they can earn as sales commissions.

On the other hand, they have little interest in partnering with you when your asset balances start to go down during the wealth decumulation phase.

The only thing they would be interested in now is selling you some high-cost product like an annuity.

Therefore, you need to make extra efforts to get good financial advice and planning for this wealth decumulation phase.

Cognitive Decline

During the wealth decumulation phase your body will experience a decline in physical and mental capabilities due to ageing.

Therefore, your wealth decumulation strategy needs to be simple enough to cater for this cognitive decline that you and your spouse are likely to face.

Research on cognitive decline shows that our ability to make sound financial choices starts to taper off after the mid 50s.

Fraud & Mis-selling

Cognitive decline combined with a large retirement corpus makes you a perfect target for financial fraud and mis-selling of financial products.

You need to be careful about who you take financial advice from. Similarly exercise caution when choosing financial products you buy for your wealth distribution needs.

A poor decision at this stage can be very costly. Always get a second or third opinion from independent sources.


You can allocate part of your wealth distribution for leaving an inheritance for your children. You could also mark some wealth for charitable giving as well.

Consider giving part of inheritance with a warm hand rather than a cold hand. Giving with a warm hand means giving money away while you are still around.

Inheritance given with a warm hand can be more useful for your beneficiries.

It will also minimize chances of any feuds after you are gone.

Do not, however, give away all your planned inheritance while you are still around.

It is very important to strike the right balance between the warm hand and cold hand inheritance.

The outline above should give you a good understanding about the 3 wealth phases in retirement planning.

Moving from one phase to the next and adapting your portfolio to these changes will lead to a financially secure retirement.

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