Why the strategy that helped you build your wealth may not be the same strategy you need to live on it.
One thing I’ve learned over the years—whether I’m meeting with clients from Milwaukee, Waukesha, or Lake Country—is that retirement isn’t simply about making good financial decisions.
It’s also about making them in the right order.
Let me explain…
Most people spend decades focused on one question: “How much do I need to save?”
It certainly is an important question, but it really only addresses the first part of planning: Accumulation.
This is the phase where we’re building wealth. We’re working, saving, investing, paying down debt, protecting our families with the right insurance, and hopefully creating a solid financial foundation.
But once retirement begins, something changes.
The math changes.
Instead of putting money into your accounts, you’re now beginning to take money out. And that requires an entirely different kind of planning called Distribution Planning.
So, instead of questions like, “How much should I put into my 401(k)?”, now the questions become:
- Where should my retirement income come from?
- How much can I safely spend?
- Which accounts should I use first?
- How do I make sure my money lasts for the rest of my life?
- And, if leaving something behind is important to you, how do we accomplish that too?
Here’s where it gets tricky.
During your working years, you generally have something retirement doesn’t always give you: time to recover from mistakes.
Think about how most of us learned to make good decisions. In many cases, it’s by having made the wrong choices and hopefully learning from them.
But when you’re approaching retirement, or perhaps you’re already retired, the reality is, there really isn’t much margin for error.
Whether that’s from an unforeseen event:
- A market crash just before getting to retirement
- An unexpected healthcare event
Or if it’s from an unintended mistake:
- Basing retirement decisions—or even timing—on simple projections or poor information
- Taking too much income too early
- Not knowing the right time to take Social Security
- Randomly taking money from your accounts, or not knowing where you should take withdrawals from and from which accounts
All of these can potentially have consequences that last for years.
And here’s the part many people don’t realize:
You can do a wonderful job accumulating money but can make costly mistakes when spending it.
That’s why I believe retirement requires a different kind of planning, where the questions shift from “How do I build enough?” to “How do I make what I’ve built last?”
Both matter, but they are not the same problem. Therefore, they shouldn’t be planned the same way.
As retirement gets closer, the goal isn’t to predict every possible thing that could happen. We cannot.
But I’ve said this to many clients over the years: “Sometimes the best thing we can do is to just plan around those things that we do know”. Then the goal is to build enough flexibility into your plan that when life—or the markets—does something we didn’t expect, one decision doesn’t derail everything you’ve worked so hard to build.
So, why is there a distinction between planning for accumulation vs. distribution?
Because the strategy that helped you build your wealth isn’t necessarily the same strategy you’ll need to live on it.
And this is where good retirement planning really begins.
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