Accumulation of retirement savings seems pretty cut-and-dried, although it certainly can be complicated. And then there’s decumulation, which a recent blog entry argues is equally important yet is largely under the radar screen.
In “A Closer Look: Decumulation Confusion” Cammack Retirement’s Michael Webb argues in Cammack’s “Insights” blog that decumulation merits more discussion. “With the aging of the Baby Boomer generation and the increasing number of individuals retiring, decumulation has become a vital topic of retirement plan discussions,” he writes. And yet, Webb notes, there is a dearth of discussion concerning the use of assets that have been accumulated.
At least there is some recognition of how important decumulation is, Webb indicates. He cites a survey by Allianz Life in which 50% more of the Baby Boomers they studied said their greatest fear in retirement was outliving their money than said they most feared death. But to Webb, recognition does not necessarily spell grasp: “Clearly, the topic of decumulation, and how to protect oneself from running out of money, is not understood,” he writes. Not only that, he argues, that fear can cause retirees to sharply limit their spending and create stress for themselves in the process. And another study found that concern about the longevity of one’s funds can engender obsession over how the investments one makes with those funds are doing, Webb adds.
These studies indicate, Webb suggests, that plan sponsors should do more than encourage retirement plan participants to build their savings for retirement — they also should educate them on how to spend those funds. And he adds that this can have an added effect — addressing the phenomenon of employees continuing to work long after they reached retirement age out of fear.