Link is HERE
As I can’t find a definition of ‘Decumulation’ in my limited search of these proceedings, and I think the term is being used in a specialised mode, I will kick off with my own stab at its meaning, and welcome others to correct or refine it.
“The process of channeling assets for retirement into ‘investments’ that will provide enough income for the years of remaining life.”
Stephen Wealthall
Thank you for the definition, Stephen. When I first saw the term I thought it meant, having accumulated vast assets over a lifetime, spending it all so there is only a very modest amount left for the firms who burn or bury you. Instead, it appears to be about turning passive assets into income-bearing ones. As someone who has no passive assets (unless, perchance, my apartment) it surprises me this is a real issue. We can inhabit very different economic communities I guess, so it is instructive to hear about issues one would not have imagined. Michael
Michael
The reason it is an issue is that many people enter retirement with some modest saving- increasingly this maybe from KiwiSaver, but there could be other lumpsums. The quesiion is when funds are limited how can they be invested and drawn down in a way that protects a person from outliving their capital?. It requires they are not constrained to using interest/divends only. So no it t is not about turning passive assets into income earning ones, or protecting capital,it is about insuring against living a long time and running out of money.
Susan, I can’t understand the distinction you are trying to make. You either have liquid assets (money somewhere, invested or not) or illiquid assets (house/apartment, bach maybe, rentals), shares in forestry) or, in the first best case, you have a private pension with a cost of living clause. Retirement is when you draw on these things to support you. Setting aside private pensions it seems one has to put the cash into some interest-bearing fund or sell assets for the same purpose. If you live long enough there is always the risk of running out of money. Am I missing something?
Ideally, with a modest lumpsum one would be able to buy an life income stream at a good price and inflation adjustments These are not available and few have private pensions any more.