Gabriel Lalonde
December 2nd, 2021

Swift Transition From Accumulation to Decumulation

Retirement is one phase of our lives we look forward to enjoying. That is why we regularly keep a good part of our paycheques in special coffers to fund the phase. Whether you are keeping yours in an RRSP and/or TFSA or running a defined contribution pension, the goal remains the same.

Retirement planning has two clear stages – accumulation and decumulation. The accumulation phase is easier and comes first. You accumulate through your working years by contributing a decent part of your income to an RRSP, TFSA, pension plan, or a combination of these accounts. In essence, what you are doing is making regular deposits to a well-diversified portfolio while minimizing the fees.

Years roll by, and the retirement phase gradually sets in, albeit sooner than we expected. The decumulation phase of your investment strategy starts once you retire. Your work income stops during this phase. After all, you are out of your job already. You must now use your accumulated assets to create income sources that will last you forever.

But going from accumulation to decumulation is not always that simple; you may have to deal with a few challenges, including the expected and unexpected ones. Let’s take a look at some of these decumulation-stage challenges.

OAS, CPP, and other government sources of lifetime income

Being a Canadian citizen comes with its perks, most especially the privilege of government support in our retirement years. But that is not always automatic. For example, your eligibility for OAS as a Canadian citizen is only valid up to a certain income level. Anything above such levels may come with an unexpected claw back. So, have these in mind when it is time to claim your OAS benefit.

Drawing down taxable (unregistered) and tax-exempt (TFSA) assets while keeping a minimum RIF/LIF withdrawal against the marginal tax rate

Once you reach a certain age, you automatically convert your RRSP (or pension) to a RIF (LIF), and taxable income becomes mandatory for you. However, if you do not need the taxable income for your retirement, it is best to keep adding to your TSFA, despite being in the decumulation phase.

Efficient risk management – market returns, life expectancy, and inflation

All of these risks thrive on uncertainty, and that is why you must ensure prudency. Generations of Canadians before us found it easier to operate within a low interest-rate environment. We do not have that luxury.

Our decumulation years are often dedicated to sourcing income while minimizing volatility. But this dedication exposes us to even greater risks, considering we operate in a low-interest environment. Therefore, it would make sense to consider a staggered approach, where you invest a considerable part of your retirement income in low-risk investment vehicles, such as money markets. While at it, you should also hold a mid-term bag of fixed-income investments without losing sight of those dividend-paying equities.

The money-market part can fetch you a steady income for a few years. You can also rotate the fixed-income part to the money market, in addition to moving some of the dividend-paying equities to the fixed-income bag. It even gets better if this is done repeatedly and consistently.

We recommend you discuss this approach with your advisor.

Deciding whether or not to explore additional sources of income

In most cases, a good part of our wealth is tied to our home’s value. A home equity line of credit (HELOC) can help you unlock some of this equity. And if you are generating income from riskier assets, this can offer a great cushion effect in the event of a market correction.

Passing on your inheritance to your heirs

You are probably thinking about a settlement of an estate as a way to achieve this. Yes, it is an option, but it is always lengthy, expensive, tricky, and emotionally demanding for everyone. However, a segregated fund can speed things up via potential creditor protection and the option to efficiently distribute wealth to your beneficiaries after your demise.


Going from being a big saver during your working years to a spender during your post-work years – accumulation to decumulation – can be a bit demanding. However, having a proper plan and timely professional counselling can be beneficial. You can get the best out of retirement by making smart choices and maximizing the options at your disposal.

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