The interesting thing about people who accumulate significant wealth is that they are often not very good at spending it. Either that, or they have so much wealth they are unable to spend it all in their remaining life, despite their best efforts. Wealth accumulators have a different relationship with money than those who are better at spending. They value and respect money, they are not afraid of it, and their pleasure and satisfaction come not from spending money but from the feelings of success or security that wealth brings.

The peak of wealth creation usually occurs at retirement. From this point, the plan is to find ways to divest wealth before, or at, the end of life. That doesn’t necessarily mean spending it. However, wealth decumulation requires a definite change in mindset.  A lifetime of focussing on growing wealth through being careful with money, or through investing all available funds to make even more, creates a mindset which makes it difficult to spend and decumulate. As a result, many retirees end their lives having underspent their money.

The starting point for decumulation is paradoxically the end. That is, the first step is to decide how much of your wealth you plan to leave for the next generation. The difference between this amount and your peak wealth is what you plan to spend. Both numbers need to be realistically achievable. In other words, you need to plan to have enough to spend, but not so much that you will struggle to spend it. Money for the next generation can be invested for the long term and kept aside as a ‘just in case’ fund for the last stage of life, while money to be spent can be allocated to broad time frames or spent by drawing a percentage each year.