Accumulation Phase vs. Retirement Phase: What’s the Difference?

Accumulation Phase vs. Retirement Phase: What’s the Difference?

When saving for retirement, your age should dictate the aggressiveness of your investment strategy, but regardless of how high (or low) your number is, you will fall into one of two distinct investment phases — the accumulation phase and the retirement phase. Depending on which phase you’re in, it makes sense to change your strategy and the types of investments you choose. As you transition from one phase to the next, it is smart to select retirement vehicles that will protect the assets you accumulated and still meet your financial needs in retirement. So, what’s the difference between the accumulation phase and the retirement phase? And what should your investment strategy be in each one? Here’s an explanation, straight from the retirement phase experts at Crash Proof Retirement:

What is the Accumulation Phase?
During your working years, your focus should be on accumulating assets so that you have enough money saved for the future. The accumulation phase occurs during a time in your life when your investment portfolio can afford the risk of investing in stocks, bonds, and mutual funds. Of course, when the stock market crashes, anyone who is invested in securities has the potential to lose everything, but investors in the accumulation phase have time to recover and rebuild if their investments lose money. The difference between the accumulation phase and the retirement phase is that, when you reach the retirement phase, you no longer have time to recover from losses and you can’t afford to take on as much risk in your retirement accounts.

What is the Retirement Phase?
As you near the end of your working years, you’re conditioned to reduce the amount of risk in your investment portfolio — this is known as the transition from the accumulation phase of your life to the retirement phase. The retirement phase is important to protect the assets that you have built during your working years to ensure that you have enough money to live comfortably throughout retirement. This transition from the accumulation phase to the retirement phase should start to take place around the age of 50, to ensure that there is enough time to secure your investments while they continue to grow. The benefits of doing so reduces the possibility of losing any of your assets, while establishing a plan to not outlive those assets by preparing for the third and final phase of investing — distribution.

Investing in securities-based financial vehicles during your retirement phase could put your savings at risk, especially in the event of an economic downturn. If you lose your nest egg immediately prior to or during the retirement phase, it is unlikely that you will have enough time to regain that wealth, and your golden years may not turn out the way you planned.

Transitioning between the Accumulation Phase and the Retirement Phase
While there are two distinct investment strategies and advantages for the accumulation phase and the retirement phase, the most crucial time in your life occurs as you transition between the two. It won’t always be clear for each investor when this transition should happen, as each investor’s financial situation is different and unique; however, there is one constant in this equation and it can help you be prepared no matter what comes up. This constant is reducing the amount of risk in your portfolio as you age. The less risk you have in your investments, the less chance you have of losing any of your assets due to market volatility. By the time you reach your 50s, you should seriously consider moving your money out of securities-based investments and putting it into safer financial vehicles that will protect your principal while continuing to grow your nest egg for retirement.

The Best Investments for the Retirement Phase Transition
If you’re preparing for the retirement phase of your life and you’re concerned that your investment strategy may be too risky, you should know that there are options to mitigate that risk. At Crash Proof Retirement, our mission is to educate investors in or near retirement about the revolutionary Crash Proof Vehicles that have already helped thousands of retirees shield their nest eggs from the risk and fees of Wall Street. Our team of licensed retirement phase experts can educate you about the exclusive Crash Proof Retirement System and how it can help you protect your assets with safe Crash Proof Vehicles that are specifically tailored to meet your needs as you transition from the accumulation phase of your life to the retirement phase. Call 1-800-722-9728 or visit crashproofretirement.com to find out how you can incorporate our proprietary Crash Proof Vehicles into your retirement phase investment strategy.