Accumulation vs. Distribution: The Give and Take of Retirement

When you meet with your financial advisor, most of your conversation centers around accumulating wealth and preparing for retirement. During your conversation, you may hear these two terms:

1. Accumulation Phase
2. Distribution Phase

While these concepts are relatively easy, you may not always make the connection between the two phases until your financial consultant lays it all out for you. The bottom line is this: How much wealth you build up during your working years (accumulation), will depend on how well you live during your retirement years (distribution). Below, we cover these two phases and what you need to know to make the easy transition from the first phase into the second phase.

Accumulation Phase

The accumulation phase begins when you start working and setting funds aside to build wealth and secure your retirement. Any time you are working—including getting a job after you already retired— then you are in the accumulation phase. For most people, the accumulation phase of your life can span 30 to 40 years. For those who continue to work due to motivation or good health, you may work for 50 years. Yet, even after you stop working, you may find ways to continue accumulating money through residual income. During the accumulation phase, your goal is not necessarily to become rich. Instead, your goal is to amass wealth and a healthy retirement fund to carry you financially for the remainder of your life. Financial planners often help you find multiple streams of income to generate as much wealth as possible. Examples of income streams include:

• Income from employment
• Savings account
• Social Security
• 401K
• Traditional Individual Retirement Account (IRA)
• Roth Individual Retirement Account (Roth IRA)
• Investments (brokerage accounts, business, real estate, etc.)
• Annuities

Your financial consultant helps you find ways to increase your retirement dollars, maximize your investments, and generate new income streams. During this phase, your goal should be to save as much as possible while you are young, healthy, and still working. It is important to save for retirement in accounts that have different tax treatment, such as tax free, tax deferred, or taxable accounts.

Distribution Phase

When you retire and start drawing money from all your income streams, you now enter the distribution phase. This is the time of life when all your savings and investments begin to support your lifestyle. By now, you’ve accumulated enough savings so that you no longer have to work should you choose to leave your job. If you no longer receive any income from this point forward, then you need to budget your savings so that you can live comfortably for the remainder of your life. Again, your financial planner can help you budget your savings and even find some investment opportunities as you get older. To secure a healthy retirement, most experts recommend you save as much as 20% of your income. This often includes feeding most of that into some type of interest-bearing retirement account. Regardless of where your money goes, it is important that you seek the advice of a financial planner who can help you along the way when you are young and as you get older.

Financial Services from Boulay

At Boulay, we work with individuals, businesses, and public entities to help ensure their financial success and stability. We are committed to helping you make the best decisions that secure your financial future. To find out more about our financial services in Eden Prairie, Minnesota, contact us at 952.893.9320 or learnmore@boulaygroup.com.

Investment Advisory Services offered through Boulay Financial Advisors, LLC a SEC Registered Investment Advisor. Certain Third Party Money Management offered through Valmark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through Valmark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Suite 300 Akron Ohio 44333-2431* 1-800-765-5201

Boulay PLLP and Boulay Financial Advisors, LLC are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc. Prime Global is not affiliated with Valmark Securities, Inc. and Valmark Advisers, Inc.