For many retirees, one of the greatest financial fears is outliving their money. After decades of building savings, a likely challenge becomes figuring out how to make those assets last. That’s where a decumulation strategy comes in. 

Decumulation is the process of turning your retirement savings into predictable, stable retirement income. A well-designed decumulation strategy helps protect against market volatility, can provide guaranteed income, and aims to support long-term financial security. 

Explore what you may need to include in a strong decumulation strategy and how annuities could support a retirement plan. This is intended to be a high-level overview, and not a recommendation for your unique situation. Everyone’s plan is different, so it is important to consider all variables and develop a plan that works for you. A strategy discussed here may not work for you. For advice concerning your own situation please contact the appropriate professional.

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What is decumulation?

Decumulation means converting the money you have saved, in retirement accounts and investments, into income that can support your lifestyle in retirement. It’s the opposite of accumulation, where your focus is on saving before you stop working.

A smart retirement decumulation strategy considers how much and when to withdraw, plus where to withdraw it from. Being mindful of distributions and managing your taxes effectively can help extend the life of your savings. 

Why does your portfolio strategy change after you stop working?

It’s not always easy to adjust to retirement — it’s a significant change. When your paycheck stops coming, you must transition from growing your assets to preserving them. Here some of the key factors that can shape your decumulation strategy.

Market volatility

As they approach retirement, most individuals look to shift to a more conservative investment strategy to help protect against market swings. A sharp downturn right before or during retirement can drastically reduce your savings when you need them. A strong decumulation strategy can help manage market risk while still allowing room for growth. For example, Gainbridge’s fixed annuities offer a fixed interest rate independent of market performance, providing capital protection and appreciation. 

Inflation

Inflation can erode your purchasing power over time, so it may be essential to keep part of your portfolio growing, even during retirement. A dynamic withdrawal strategy that combines growth and income generation can help cover expenses without potentially exhausting your savings too soon. 

Longevity uncertainty

One of the biggest unknowns in retirement is how long it will last, and planning without a clear end date can make sustainable cash flow essential. That’s where guaranteed income solutions like lifetime annuities could come into play, giving you the peace of mind that you could have steady income as long as you live. 

What is a drawdown strategy using the bucket approach?

A drawdown strategy is a plan for how you’ll withdraw money from your retirement savings in a way that can support your lifestyle while preserving your portfolio. A popular drawdown method is the bucket approach. Instead of treating your savings as a single pot, this strategy divides your assets into three distinct “buckets” based on time horizon and risk tolerance. In this strategy, you would withdraw from your short-term bucket while allowing the other buckets to grow and hopefully replenish the funds over time. Here’s how it might look.

Short-term bucket (2–5 years)

This bucket holds enough to cover your immediate expenses — typically two to five years’ worth — in stable, low-risk investments. This helps reduce the need to sell growth assets during a market downturn, protecting both your principal and long-term returns. Assets in this bucket typically include:

• High-yield savings accounts
• Treasury bills
• Short-term bond exchange-traded funds (ETFs)

Intermediate bucket (5–10 years)

This bucket is slightly more growth-oriented and periodically aims to refill the short-term buckets. It’s typically designed to outpace inflation while remaining less volatile than stocks. You can adjust the allocation based on market performance, spending changes, and tax planning needs. Assets in this bucket often include:

• Short to intermediate-term bonds
• Balanced ETFs and mutual funds 
• Blue chip, dividend-paying stocks 

Growth bucket (10+ years)

This is your long-term engine for growth, ideally helping your portfolio keep up with inflation and stretch over retirement. Since you shouldn’t need access to this money for a few years, you can invest it more aggressively. As assets mature, they can top up the intermediate bucket as needed. Generally, this bucket typically includes:

• Stocks, ETFs, and mutual funds

What is the role of annuities in decumulation?

A strong decumulation strategy likely includes income you can count on. During this phase, you would typically need to generate reliable cash flow — while windfall from a booming stock can feel like a win, it may not offer the consistency most retirees need. 

Annuities, particularly fixed annuities, can provide predictable payments in retirement that continue month after month, regardless of market conditions. They can give retirees peace of mind knowing exactly how much income they’ll receive and when. When combined with pensions and Social Security benefits, annuities can help fund essential and discretionary expenses. For many retirees, incorporating fixed annuities into the decumulation plan means predictable growth or income, allowing them to potentially draw down other assets more strategically. 

Build a decumulation strategy with Gainbridge

Annuities can play a critical role in safeguarding your savings and potentially give you the confidence to enjoy retirement on your terms. With our innovative platform and no hidden fees, Gainbridge can help you design a comprehensive retirement plan that can offer security and stability. 

To start creating a secure financial future, contact Gainbridge today.

‍This article is intended for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. For advice concerning your own situation please contact the appropriate professional. The GainbridgeⓇ digital platform provides informational and educational resources intended only for self-directed purposes. Investing involves risk, including loss of principal and past performance does not guarantee future results.