distribution phase
The retirement period focused on drawing down accumulated assets to fund living expenses.
Example
“Entering the distribution phase required a complete mindset shift from saving to strategic spending.”
Memory Tip
DISTRIBUTION — the shift from saving to spending. Requires a new strategy.
Why It Matters
Understanding the distribution phase is crucial because it determines how long your retirement savings will last and what lifestyle you can maintain after leaving the workforce. Proper planning during this phase helps you avoid running out of money and make informed decisions about withdrawals, taxes, and asset allocation.
Common Misconception
Many people believe they should move all their money to cash once retirement begins, but this approach often fails to account for inflation and the need for growth over a potentially 30+ year retirement. A balanced portfolio with some growth-oriented investments typically serves retirees better than holding only safe, low-yielding assets.
In Practice
A 65-year-old retiree with 500,000 dollars in savings might withdraw 5 percent annually (25,000 dollars per year) to cover living expenses while keeping the remaining portfolio invested to generate growth. Over time, as the portfolio grows or shrinks based on market performance, the withdrawal amount adjusts to account for inflation and maintain purchasing power throughout retirement.
Etymology
From Latin 'distribuere' meaning to divide — dividing accumulated assets for spending.
Common Misspellings
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