Friday, March 23, 2012

Decumulation Strategy

We spend most of our working lives trying to accumulate pension assets that will generate an income for us when we stop working. We spend a lot of time thinking how best to do this. Unfortunately, for most of us, it is only when we are faced with a retirement date that we start to think about decumulation ie. converting pension assets into lifetime income.

In the pre Approved Retirement Fund (ARF) era this was pretty straightforward. You elected to take as much tax-free-cash as you could and bought an annuity with the balance. That didn’t really need a decumulation strategy if your pension fund was your only retirement asset.

Today, we have ARFs, Annuities and Vested PRSAs to choose from in the post-retirement pension product market. All of these products have their merits. Depending on your financial circumstances and attitude to risk, choosing a single product may offer the best solution for you.

However, the multiple-product solution is something that you should spend a bit of time researching. Rather than leave it till the week/month that you retire to devise a strategy, why not do it now.

No comments: