If you’ve never seen it before, “decumulation” is the opposite of accumulation and is effectively a fancy word for converting your retirement assets into a stream of income.

Research shows that making choices on how to spend down a lifetime of savings can be tough for many people.

Some have a really hard time shifting their mindset from saving to spending, while others may access their benefits (or savings) faster than advisable.

Here are three common causes of decumulation mistakes along with strategies for avoiding them:

Loss Aversion

In the context of decumulation, loss aversion refers to the fear some people experience of losing benefits in retirement if they do not access them as soon as possible.

An example of this would be claiming Social Security benefits as soon as you’re able to–not because you need the money then, but because you’re afraid you’ll otherwise lose them altogether (a strategy that may not be in your best interest).

Psychological Ownership

This refers to the feeling of something being yours, which, when talking about financial planning for retirement, may also lead to sooner-than-advisable access of entitlements or savings.

An example of this is how many people think of Social Security benefits as their “deserved reward” for working their entire lives. This mindset can make delaying benefits more difficult.

Click the button below to get your Free Assessment!

Self-Control issues

These cause tension between short-term and long-term goals (such as wanting to save for later years but also having the desire to use savings right now for enjoyment).


Here are some approaches that researchers recommend retirees that are looking to avoid making decumulation mistakes:

  • Increase financial literacy. Some researchers advocate for a training program for retirees ahead of making large financial decisions.
  • Automatic drawdown options In the same way that automatic 401(k) contributions help workers save for retirement, automatic drawdown options such as an automatic conversion of savings into an annuity could cause retirees to have more guaranteed income.
  • Customized intervention. Working with a financial planner who can assess your loss aversion and other key measures before guiding you through decisions that appeal to your personalized needs and desires may be the best way to prevent making decumulation mistakes.

Listen to our recent podcast episode, all about decumulation!

If you haven’t thought about decumulation yet or would like to discuss your thoughts with a professional advisor, we can help. Click here to schedule a free meeting.


Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k)administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

Retirement Income