For much of your working life, retirement planning is focused on saving.
Whether you’re building up a pension, investing, or putting money into savings, the aim is clear: to create a financial safety net for later life. But once you stop working, the goal shifts. Now it’s about how you use what you’ve built.
This shift is known as decumulation – using your accumulated assets to fund your retirement. It can be one of the most challenging transitions in personal finance, especially as people live longer and rely more heavily on defined contribution (DC) pensions. So, how do you approach this new phase with confidence?
What is decumulation?
Put simply, decumulation is the stage of life where you begin drawing an income from the savings and investments you built during your career. This might include your pension, ISAs, or other assets. The key challenge is finding a balance: how do you support the lifestyle you want now while making sure your money lasts?
With DC pensions becoming more common, individuals have more responsibility than ever when it comes to managing their retirement income. Unlike defined benefit pensions, which pay out a guaranteed amount, a DC pension gives you a pot of money to use as you choose. This gives you flexibility, but also places more of the decision-making in your hands.
A change in mindset
Many people find it difficult to switch from saving to spending. After decades of contributing regularly to a pension or other savings accounts, using those assets can feel uncomfortable. Watching a pension pot grow provides a sense of security, and the idea of reducing it can trigger worry about running out of money.
This is where planning becomes essential. Understanding your long-term needs and how best to draw income can help you make informed, confident decisions.
Practical steps for managing decumulation
- Get tailored financial advice
Everyone’s circumstances are different. The best way to build a sustainable retirement income plan is to work with a financial planner who understands your goals, needs, and any concerns you may have. They can help ensure you make tax-efficient decisions and avoid common pitfalls. - Understand how long your money needs to last
Life expectancy is increasing. A 65-year-old man today has a one-in-four chance of reaching 92. For women, it is 94. Retirement could last 25 to 30 years or more. Your financial plan should reflect that timeline and allow for flexibility as your needs change over time. - Review your investment risk
You may have taken more risk during your accumulation years to grow your money. But in retirement, when you are drawing an income, your appetite for risk may be lower. If markets fall and you’re withdrawing funds at the same time, your capital can erode more quickly. A financial review can help assess whether your current investments still align with your goals. - Keep reviewing your plan
Retirement is not static. Your priorities may change. You might want to fund travel, support family, or release equity by downsizing. Regular financial reviews will ensure your income strategy continues to reflect your lifestyle and adapts to changes such as inflation or unexpected expenses.
Start planning with expert support
Decumulation does not need to be daunting. With the right advice and a clear plan, you can enjoy your retirement knowing your finances are working for you.
If you are approaching retirement or already drawing from your pension and want guidance on how to manage your assets effectively, speak to the team at Appletree Finance. We are here to help you feel confident about your financial future.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Approved by The Openwork Partnership on 14-04-2025.
