What is the "Distribution" Phase of Retirement?

At a certain point in our lives, we are faced with important choices that could help defer or mitigate taxes. We spend the majority of our working years saving and accumulating assets, but then what?

As we grow older, we leave a period of relative complacency about money and transition into a more critical period of anxiety and fear during the distribution phase, the time when we begin to tap into our sources of income during retirement.

Careful distribution planning is required lest we drain our assets too quickly or withdraw assets in a tax-inefficient manner. Our asset distribution choices will ultimately dictate the kind of lifestyle we can enjoy when we leave the workforce. Successful distribution planning means understanding the challenges, opportunities and risks associated with this critical time.

Two big fears that many Americans face are 1) running out of money and 2) stock market volatility. The fear of outliving assets and consequently choosing an aggressive investment strategy may not be the best decision. Why? The answer is tied to the other fear – market volatility. It wasn’t so long ago that many hard working people lost a ton in 2008 and 2009 due to market turmoil. Many people had to delay their retirement and continue to work to try and build their portfolios back up as much as they could while knowing they wouldn’t be able to really recapture what had been lost. Understandably, investors still carry an aversion toward any investments that may threaten their principal and expose them to risk.

The good news is that despite increased anxiety about running out of money and losing assets to market volatility, safe choices for investors approaching retirement are greater than ever before. Investors can protect their principal, lock in gains and generate a stream of income that they cannot outlive. Your retirement distribution specialist and tax professional can work with you to identify the right safe options for you and your family.