Decumulation Demystified

The natural income buffer

Investors’ objectives and risks change when they move from saving for retirement to drawing down an income. Due to sequence risk, we have found that the type of income withdrawn matters a great deal to final outcomes.

40% of investors withdraw the same amount every year regardless of market performance
The natural income buffer

Building a retirement pot can be psychologically difficult – it often requires locking up today’s capital in order to save for the future. Yet in many ways it is straightforward as the order in which an investor pursues the accumulation phase does not matter all that much. 

So long as nothing is withdrawn from the pot until retirement, the sensitivity of the pot’s total value to the sequence of events leading up to it, sequence risk (often referred to as pound-cost ravaging), is quite low.

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