When conversations around retirement planning come up, it is common to hear about the accumulation phase and the distribution phase. The accumulation phase is essentially the time period when you are building your wealth prior to retirement. Once you retire, the distribution phase starts and the wealth you’ve accumulated is used as an income source.

Without Accumulation, You Cannot Enter Distribution
From our point of view, the accumulation phase is the more important of the two phases. This should be obvious because if you do not accumulate any wealth, there is nothing from which you can take distributions once you enter into retirement. However, that is not to say that the distribution phase is not important. The distribution phase is very important as well, as there needs to be a clearly defined income plan with the goal to make your money last longer than you do.

Longer Life Expectancies
In addition to the point above, the accumulation phase is even more important when you consider the fact of what retirement may look like in the future. Because of technology, medical advances, and healthier lifestyles, the current workforce is most likely going to live longer than the Baby Boomers and the retirees before them. What this means is that the distribution phase of retirement is going to be a whole lot longer for future generations than it was for past generations. This puts even more pressure on investors to make sure that they are saving early and saving enough during the accumulation phase.

Future Changes To Social Security
Also, it is important to note that Social Security as we currently know it is most likely not going to be the same. Based on the 2018 Social Security Trustees Report, it is expected to run out of money in 2034. (1) This expectation coupled with the fact that most companies do not offer pensions anymore points again to the importance of the accumulation phase. Investors that are planning for their retirement need to understand that they will not have as much help as past generations have had from the likes of Social Security and pensions.

Get Ahead Of Retirement
If you are currently in the accumulation phase of your life, the most important thing that you need to do is create a financial plan that is tied to your retirement goals. Retirement may seem so far out in the future that it may be nearly impossible to comprehend what your expenses and income needs will be. However, if you take the time today to think through what that may look like, you will be more confident as to the targets you need to hit when it comes to your investments.

With that being said, it is important to know what options you have available when it comes to the investments that have the ability to generate income for you in retirement. You want to know what those are, invest in them early, and make sure that you are properly allocated based on your goals, time horizon, and risk tolerance.

How To Take Action
We understand that thinking about retirement and changing habits today for something so far along in the future can be tough. We want to help make that conversation easier to understand and empowering for you. At Wealth Management Solutions, we care about you as an individual and take the time to get to know you personally before we dive into the numbers. If you want to see if we are the right fit for you, contact us for a complimentary consultation by calling (949) 475-9700 or emailing info@wms-llc.com.

About Richard
Richard Riva is the founder of and wealth advisor at Wealth Management Solutions, LLC, an independent financial services firm based in Newport Beach, California. For more than two decades, he has specialized in managing the complex financial matters that affect high-net-worth individuals and their families. He strives to serve as a trusted advisor and fiduciary, helping clients build a strong financial plan that allows them to live a confident, complete and distinctive life. Learn more about Richard by connecting with him on LinkedIn or emailing info@wms-llc.com.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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(1) https://www.ssa.gov/oact/TR/2017/tr2017.pdf