Making the Transition to the Distribution Phase of Your Financial Life

Joshua Ramirez
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4 min readApr 23, 2020


The following is adapted from Income for Life by S. Joseph DiSalvo and Marie L. Madarasz.

The two phases of one’s financial life, accumulation (the saving years) and distribution (the spending-of-savings years), share several similarities. Each phase lasts between twenty-five and thirty years and during both phases, foundational principles of investing are of critical importance. In both phases, market risk is an inevitability that must be managed.

A person spends their working years accumulating resources that will be distributed during retirement. The money accumulated will serve as the basis for the person’s retirement income for decades. We’ll focus on the distribution phase in depth below.

Financially speaking, the place where a person can make the single greatest impact on their retirement is in exactly how they plan to turn their accumulated resources, their savings, into income for the rest of their lives. Other forms of income, like social security and pensions, also come into play; however, we know that where you can have the most ability to impact your retirement income, for good or bad, is in the proper management and distribution of your accumulated savings.

In simple terms, planning income for the distribution phase involves deciding exactly how to create a regular income out of a retiree’s accumulated investments.

For many retirees, the distribution phase represents the first time in their lives that their investments and their income are tightly intertwined. Throughout the accumulation phase, a person’s investments are largely separate; they likely have a 401(k) that remains untouched, and they may have non-retirement investments.

Their income, though, is totally separate from those entities; it’s the steady check deposited into their bank account to be used in the now, whereas investments are money planned for the future.

In the distribution phase of a person’s life, suddenly their investments are their income; or, at the very least, those investments constitute a component of their monthly or annual income.

In order to produce a consistent and dependable income that can grow to offset inflation, one must marry their investment and income strategies in such a way that they are prepared for the shorter-term risks (market and withdrawal) and longer-term risks (inflation, longevity, tax) a retiree will face. Having a plan in place in order to manage these risks is vital to a retiree’s future income.

Another key impact on the distribution phase is the financial concerns that are unique to people of retirement age, primarily the rising costs of healthcare. A distribution plan that does not adequately take these costs, which increase with age and can be unpredictable, into account will create a retirement in which carefully won confidence is lost when things go wrong.

Without a plan, the distribution phase can quickly go wrong. Mistakes made early on compound as the margin for error compresses over time. More than anything, it’s important for a retiree to carefully and thoroughly plan for the distribution phase of their life.

We worked with a couple years ago who made several common errors in the time leading up to their retirement. At first glance, they seemed reasonably well-prepared for their retirement, with a paid-off house, social security, and several million dollars.

The problem, we discovered, was that on the advice of their broker, they had recently moved their money into a more conservative portfolio, from which the expected rate of return has little chance of keeping up with normal rates of inflation.

Inflation is like carbon monoxide. You can’t see it, taste it, or smell it, but it’ll kill you — or, metaphorically speaking, compromise your financial security, if not properly planned for.

As a result of the rise of inflation, these clients had dipped into their principal again and again over the decades just to keep pace with the rising cost of living. By the time we met them, they were in their late seventies.

At that point in a person’s life, it’s difficult to even consider a different approach to their investment strategy; they’re locked into a dangerous pattern.

The most important thing you can do as a retiree, or if you are thinking about retirement, is to develop a well-educated retirement income plan. Even with the risks of market volatility, withdrawal, inflation, longevity, and taxes, a correct understanding of how to develop a coordinated income, investment, and tax strategy can help you face your future with confidence.

For more advice on the transition from accumulation to distribution, you can find Income for Life on Amazon.

S. Joseph DiSalvo, ChFC, AIF and Marie L. Madarasz, AIF of Quest Capital & Risk Management, Inc. are committed to bringing their clients the clarity that will promote and enhance confidence in the future. For more than two decades they have used a proven process that helps clients think through how best to structure and manage their resources in order to produce a growing stream of retirement income for life. As experts specializing in all aspects of Retirement Income Planning, they are passionate about the coordination and integration of their clients’ income, investment, and tax planning strategies in order to help clients live the life they’ve worked hard for. Joseph and Marie are strong advocates of financial education, seeking to teach others how to achieve sustained success and lifelong prosperity.