For many Americans, their financial planning goals can be broken down into two periods: saving for retirement and spending in retirement (if you’re up on your financial industry jargon, you might know these phases as accumulation and decumulation, respectively). While this is definitely an oversimplification of the complexities of saving for retirement, it helps identify the primary differentiating factor of these two distinct time periods in life. (Click here for an overview of retirement income spending strategies).
Saving for retirement is all about wealth accumulation. Spending in retirement is more about decumulation – spending down your assets and generating cash flow to meet goals and needs.
To create cash flow, you need to implement retirement income planning alongside saving for retirement, although they require distinctly different mindsets and strategies. Perhaps the most popular retirement income strategy financial advisors use to accomplish this goal is the systematic withdrawal approach. Let’s take a look at what this strategy is and how it works.