Adjusting Investment Strategy Over Time: Moving from Accumulation to a Reliable Income

In my years serving retirees across New Hampshire and Massachusetts, I’ve noticed a common misconception: the idea that the investment strategy that got you to retirement is the same one that will get you through it. As a financial advisor, I view your financial life as a structure with two distinct phases that require very different blueprints.

The Fundamental Shift: Accumulation vs. Decumulation

During your working years—the accumulation phase—you possess "human capital." If the market takes a winter-like turn, you have the flexibility to work longer or increase your savings to compensate. However, once the paychecks stop and you enter the decumulation phase, your risk capacity diminishes significantly. You no longer have the luxury of time or a steady salary to cushion investment losses. The goal must shift from maximizing growth to managing the reliability of your income streams.

Managing the "Butterfly Effect" of Sequence Risk

In retirement, the timing of your returns matters more than the average return. We call this Sequence of Returns Risk. Think of it as a financial "butterfly effect": a significant market drop in the first few years of your retirement can permanently deplete your portfolio’s ability to recover, even if the markets eventually bounce back. To mitigate this, your strategy must evolve. We often explore a "rising equity glidepath," where we start retirement with a lower stock allocation to reduce vulnerability to early losses, gradually increasing exposure as your plan stabilizes.

Matching Assets to the "Distribution Hatchet"

Real-world spending isn't a flat line; it often resembles a "hatchet." Withdrawals are typically highest in the early "go-go" years (the blade) before Social Security or pensions fully kick in (the handle).

Because of this front-loaded demand on liquidity, a static withdrawal rate is rarely the answer. Instead, I advocate for risk-based guardrails—pre-set rules that trigger small spending adjustments based on market conditions. This ensures you aren’t overspending during a downturn or unnecessarily depriving yourself during a bull market.

From Static to Dynamic

A robust plan isn't about finding one "safe" number and never looking back. It involves a dynamic approach—integrating tools like annuities, pensions, and portfolio withdrawals into a coherent framework that fits your specific temperament. By focusing on structure and disciplined follow-through, we replace the fear of catastrophic failure with the clarity of small, calculated course corrections.

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