When did (will) your accumulation phase end?

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jco
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When did (will) your accumulation phase end?

Post by jco » Sun Feb 16, 2020 7:14 pm

Edit: I restated the questions below for clarity. Thank you to everyone who already responded.

I frequently see members comment on their accumulation phase of investing. My understanding of this phase is that it is the phase where your contributions are a large part of your overall "performance". At some point, the returns you typically get from your portfolio are much larger than the contributions you make each year, and one focuses on preserving the wealth you've gained instead of focusing on generating substantially more wealth.

When did you mentally shift from focusing on accumulating a bigger retirement and instead focusing on preserving what you'd already amassed? What signaled the change to you?
Last edited by jco on Sun Feb 16, 2020 8:32 pm, edited 1 time in total.

retiredjg
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Re: When did (will) your accumulation phase end?

Post by retiredjg » Sun Feb 16, 2020 8:01 pm

To me, accumulation phase was when I was working and saving (accumulating) money for retirement. De-cumulation started the day I retired.

It had nothing to do with whether contributions or returns were the moving factor in my portfolio.

I'm not saying that doesn't happen because it does. I'm saying that it had nothing to do with the end of what I considered to be "accumulation".

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Re: When did (will) your accumulation phase end?

Post by FiveK » Sun Feb 16, 2020 8:04 pm

Started replying but it would have been a repeat of what retiredjg said.... :)

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Re: When did (will) your accumulation phase end?

Post by Gnirk » Sun Feb 16, 2020 8:07 pm

When we retired at the beginning of 2007.

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Re: When did (will) your accumulation phase end?

Post by frugalecon » Sun Feb 16, 2020 8:12 pm

I am still contributing, maybe 5-6 years out from retirement, but it is true that at this point the contributions don’t really move the needle that much in terms of what sort of income stream i am likely to have when I quit working. I have even considered dialing back the workplace savings to generate more income to attack the mortgage and fund home improvements. Even if I dialed all the way back to just the level I need for the maximum match, it really wouldn’t matter that much.

At this point total workplace savings represent at most 20% of the yearly change in the portfolio, which is already at a fine level for sustaining us, along with pensions and SS.
Last edited by frugalecon on Sun Feb 16, 2020 8:14 pm, edited 2 times in total.

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Re: When did (will) your accumulation phase end?

Post by pasadena » Sun Feb 16, 2020 8:12 pm

retiredjg wrote:
Sun Feb 16, 2020 8:01 pm
To me, accumulation phase was when I was working and saving (accumulating) money for retirement. De-cumulation started the day I retired.

It had nothing to do with whether contributions or returns were the moving factor in my portfolio.

I'm not saying that doesn't happen because it does. I'm saying that it had nothing to do with the end of what I considered to be "accumulation".
This. I expect that my accumulation phase will end when I retire.

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Re: When did (will) your accumulation phase end?

Post by Trader Joe » Sun Feb 16, 2020 8:21 pm

jco wrote:
Sun Feb 16, 2020 7:14 pm
I frequently see members comment on their accumulation phase of investing. My understanding of this phase is that it is the phase where your contributions are a large part of your overall "performance". At some point, the returns you typically get from your portfolio are much larger than the contributions you make each year.

When did your accumulation phase end (or when do you expect it to end)? What signaled the change to you?
My accumulations phase will never end.

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Re: When did (will) your accumulation phase end?

Post by Jerry55 » Sun Feb 16, 2020 8:44 pm

Like others above, it ended when I stopped working in 2012, as I can no longer contribute to my TSP or any other investments per se.
I haven't begun "De-Accumulating" if there's such a term, but it fits perfectly. It's still in the TSP, rather aggressively for my age though.
It's doubled since 2012 and I haven't added anything, but in a few years when I'm 68'ish, I'll begin to move into more protective areas.
Whatever I do save now goes into Treasuries and such....
It's been a good ride.
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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Re: When did (will) your accumulation phase end?

Post by Unladen_Swallow » Sun Feb 16, 2020 8:52 pm

retiredjg wrote:
Sun Feb 16, 2020 8:01 pm
To me, accumulation phase was when I was working and saving (accumulating) money for retirement. De-cumulation started the day I retired.
+1. This is my plan.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

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Re: When did (will) your accumulation phase end?

Post by firebirdparts » Sun Feb 16, 2020 8:59 pm

Mentally, I have made the switch this year. I didn’t retire, but my portfolio has basically exploded since Christmas 2018.
A fool and your money are soon partners

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jco
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Re: When did (will) your accumulation phase end?

Post by jco » Sun Feb 16, 2020 9:33 pm

firebirdparts wrote:
Sun Feb 16, 2020 8:59 pm
Mentally, I have made the switch this year. I didn’t retire, but my portfolio has basically exploded since Christmas 2018.
What flipped your mental switch? Was it the amount? Your reluctance to lose what you accumulated? Looking at the amount of time until you retired?

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Re: When did (will) your accumulation phase end?

Post by MathIsMyWayr » Sun Feb 16, 2020 9:43 pm

The accumulation phase will continue as long as the earnings exceed the expenses and taxes.

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Re: When did (will) your accumulation phase end?

Post by Dottie57 » Sun Feb 16, 2020 10:02 pm

retiredjg wrote:
Sun Feb 16, 2020 8:01 pm
To me, accumulation phase was when I was working and saving (accumulating) money for retirement. De-cumulation started the day I retired.

It had nothing to do with whether contributions or returns were the moving factor in my portfolio.

I'm not saying that doesn't happen because it does. I'm saying that it had nothing to do with the end of what I considered to be "accumulation".
+1

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Re: When did (will) your accumulation phase end?

Post by Hatch Batten » Sun Feb 16, 2020 10:06 pm

As long as I'm pulling in income at about 50% or more of my "prime years" level, I'll continue to contribute to retirement funds. That's penciled in through age 59, but it will probably depend quite a bit on circumstances.

Factors include my ability and willingness to work, whether I develop alternative income streams, perceived value of pushing ahead with accumulation vs retiring, and my desire to engage more with non-income-producing interests. Being realistic, changing needs and desires of certain family members may also play a role.

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Re: When did (will) your accumulation phase end?

Post by heyyou » Sun Feb 16, 2020 10:26 pm

In retirement, my 60/40 allocation has at least a decade of spending in the 40% bond portion. During a long and severe stock crash, I will make every effort to only spend near 4% of each recent annual portfolio balance, to boost my portfolio longevity.
Everyone wants certainty, but there is little to none in long term financial markets, so expecting to need to adapt is wise.

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Re: When did (will) your accumulation phase end?

Post by firebirdparts » Sun Feb 16, 2020 10:30 pm

jco wrote:
Sun Feb 16, 2020 9:33 pm
firebirdparts wrote:
Sun Feb 16, 2020 8:59 pm
Mentally, I have made the switch this year. I didn’t retire, but my portfolio has basically exploded since Christmas 2018.
What flipped your mental switch? Was it the amount? Your reluctance to lose what you accumulated? Looking at the amount of time until you retired?
Primarily it's the nearness of a possible early retirement. I am at a point in life where a bad sequence of returns might make a big difference, and what I am actually seeing of course is a really good sequence of returns, so far.
A fool and your money are soon partners

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Re: When did (will) your accumulation phase end?

Post by PaulF » Sun Feb 16, 2020 10:32 pm

In answer to your updated question:

For me, the transition came in a fairly short period due to unrelated developments, one happy, one sad. The happy one was that my wife and I both got large (~20%) raises, which in turn meant that our pensions would be ~20% higher than planned (provided we worked for 3 more years). The sad development was that my dear sister died of cancer in her mid/late 50's, and I came to realize that tomorrow is guaranteed to no one. Essentially at the same time, I also realized that we were close to being FI due to diligent savings. The switch was flipped, and my time since then has been spent trying to plan the decumulation period before pulling the plug (now planned for mid-2021).

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Re: When did (will) your accumulation phase end?

Post by Gretchen » Sun Feb 16, 2020 10:32 pm

We are trying to decumulate in retirement, but the market is currently outrunning our spending.

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Re: When did (will) your accumulation phase end?

Post by thelateinvestor43 » Sun Feb 16, 2020 10:34 pm

Since I'm single and don't have a large income most likely never.

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Re: When did (will) your accumulation phase end?

Post by Normchad » Sun Feb 16, 2020 10:41 pm

My mentality is just starting to change. I’ve come to the realization that I’ve got a lot saved now, and if I just wait until retirement, it will be plenty.

So I don’t think I need to sock away any more cash.

Having said that, I make more than I spend. So the excess is getting saved someplace. Although the motivation has changed from “I need to save and be frugal so I can retire someday” to “I have saved a lot, I’ll be fine even if I don’t save another dollar”.

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Re: When did (will) your accumulation phase end?

Post by Soon2BXProgrammer » Sun Feb 16, 2020 10:42 pm

jco wrote:
Sun Feb 16, 2020 7:14 pm
Edit: I restated the questions below for clarity. Thank you to everyone who already responded.

I frequently see members comment on their accumulation phase of investing. My understanding of this phase is that it is the phase where your contributions are a large part of your overall "performance". At some point, the returns you typically get from your portfolio are much larger than the contributions you make each year, and one focuses on preserving the wealth you've gained instead of focusing on generating substantially more wealth.

When did you mentally shift from focusing on accumulating a bigger retirement and instead focusing on preserving what you'd already amassed? What signaled the change to you?
I am planning to quit my software engineering job, and FIRE, and open my financial advising business. While I think i might make something, being an hourly only planner is the hardest way to make money, therefore, i have transitioned to a portfolio that should support us, and any money I make is really just beer money.

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Re: When did (will) your accumulation phase end?

Post by sailaway » Sun Feb 16, 2020 11:02 pm

I think that your savings rate might make a difference in how you perceive the process.

If you are saving 20% each year, each year of saving can easily end up being 1% or less of your total nest egg by the end of the accumulation phase. It might hardly seem worth it.

If you are saving more than you spend each each year, your annual additions could be 5% or more of your nest egg right up until you start withdrawing. The needle definitely moves.

The bull market is another thing that affects perception. Even that 1% addition would seem important if the portfolio weren't growing at 10-20% for a few years.

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Re: When did (will) your accumulation phase end?

Post by digarei » Sun Feb 16, 2020 11:11 pm

jco wrote:
Sun Feb 16, 2020 7:14 pm
Edit: I restated the questions below for clarity. Thank you to everyone who already responded.

I frequently see members comment on their accumulation phase of investing. My understanding of this phase is that it is the phase where your contributions are a large part of your overall "performance". At some point, the returns you typically get from your portfolio are much larger than the contributions you make each year, and one focuses on preserving the wealth you've gained instead of focusing on generating substantially more wealth.

When did you mentally shift from focusing on accumulating a bigger retirement and instead focusing on preserving what you'd already amassed? What signaled the change to you?
Contributions may vary. Portfolio income and returns, likewise. Therefore there is no reason to use the ratio between them to trigger any specific action. The size of the portfolio is a product of contributions/withdrawals, market increases/declines, sequence of returns, earnings/losses, interest/dividends, taxation and other expenses, over time. It’s not only contributions. It’s the time one is invested.

It’s possible my accumulation phase will never end. My retirement budget includes X dollars per month to be expended toward savings and investment. At some point, I will no longer be able to contribute into tax-sheltered accounts but my plan is to continue funding investments in perpetuity. In the future, I may decide to reduce the portfolio by 3% a year or some other amount.

No mental shift has occurred and none is anticipated. I’ve been retired for five years and maintain an 80/20 portfolio. Everyone is different.

When should one focus on preservation? I think that attitude is prerequisite to sound investing and therefore is applicable to all investors.
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Re: When did (will) your accumulation phase end?

Post by hicabob » Sun Feb 16, 2020 11:22 pm

For some of us it depends on the market. I sold a small biz 7 years ago and put most of it into VTI. It has done well to say the least and my net worth has very much benefited but with investment income, not sweat, tears and blood. It doesn't feel like accumulation phase in terms of the work but the $$ increase in my portfolio is phenomenal.

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Re: When did (will) your accumulation phase end?

Post by vipertom1970 » Mon Feb 17, 2020 12:00 am

I investing for growth with no W-2 income the same as accumulation ?

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Re: When did (will) your accumulation phase end?

Post by digarei » Mon Feb 17, 2020 1:20 am

vipertom1970 wrote:
Mon Feb 17, 2020 12:00 am
Is investing for growth with no W-2 income the same as accumulation ?
I don’t see why it wouldn’t be considered “accumulation” if we stipulate to the usual meaning of that word. If you buy new shares with money from any source, that’s still investing/accumulating. I guess we should exclude cash disbursements generated from the same portfolio, which would be an exchange between securities or dividend reinvestment.

If your household income doesn’t include W-2 wages/salaries, there are limited opportunities to contribute into tax sheltered accounts yet we can all contribute to taxable.
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Re: When did (will) your accumulation phase end?

Post by retiredjg » Mon Feb 17, 2020 7:17 am

The updated question seems to focus on the change from wanting/needing to grow the portfolio to wanting/needing to preserve the portfolio. In my book, that is the same as "when did you start adding more bonds?"

The answer for me was 4 months before retirement when I looked at my portfolio and realized it was too risky. The answer should have been something like a few years before retirement.... :oops:

I got lucky. It worked out OK but it could just as easily have worked out badly.

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Re: When did (will) your accumulation phase end?

Post by carolinaman » Mon Feb 17, 2020 7:25 am

Like others, our accumulation phase largely ended when I retired at the end of 2010. We live off of SS and 2 pensions (non COLA) for the most part. Our goal was to avoid using our investments as long as we could without affecting our lifestyle. Other than the purchase of 2 vehicles and some remodeling, we have achieved that and our investments are 66% greater than they were when we retired.

The accumulation phase will happen. For us, the most important part is what is our decumulation strategy. This would be more critical if we were living off of our investments.

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Re: When did (will) your accumulation phase end?

Post by mcblum » Mon Feb 17, 2020 9:22 am

retired 2.5 years now. got my second comma two weeks ago. can only contribute to taxable, so i have been sending in about one share's worth of VOO every month. Therefore, still accumulating. Only take interest from Roth IRA.It's a great game and I've won. Only took me thirty years
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Re: When did (will) your accumulation phase end?

Post by B. Wellington » Mon Feb 17, 2020 9:24 am

retiredjg wrote:
Mon Feb 17, 2020 7:17 am
The updated question seems to focus on the change from wanting/needing to grow the portfolio to wanting/needing to preserve the portfolio. In my book, that is the same as "when did you start adding more bonds?"

The answer for me was 4 months before retirement when I looked at my portfolio and realized it was too risky. The answer should have been something like a few years before retirement.... :oops:

I got lucky. It worked out OK but it could just as easily have worked out badly.
DW and I are 2-3 years from (early) retirement and quite possibly much sooner depending on a number of factors. The markets have been good to us as well.

I will continue to max out 401(k) and Roth IRA's, however I have added very little to the taxable account this year because what little I would invest would not move the needle much and would only add more risk.

Retirement, vehicle replacement, home repairs, and vacation time is now priority.

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Re: When did (will) your accumulation phase end?

Post by ryman554 » Mon Feb 17, 2020 9:41 am

frugalecon wrote:
Sun Feb 16, 2020 8:12 pm
I am still contributing, maybe 5-6 years out from retirement, but it is true that at this point the contributions don’t really move the needle that much in terms of what sort of income stream i am likely to have when I quit working. I have even considered dialing back the workplace savings to generate more income to attack the mortgage and fund home improvements. Even if I dialed all the way back to just the level I need for the maximum match, it really wouldn’t matter that much.

At this point total workplace savings represent at most 20% of the yearly change in the portfolio, which is already at a fine level for sustaining us, along with pensions and SS.
I would love to have your problem...

I manage to sock away $100k+ a year. (about 1/3 total income)
At that savings rate, I figure I would need a $5+ million portfolio for those contributions not to matter all that much (2% of value).

Or, perhaps I'm just too conservative. If you are looking at contributions equaling 20% of yearly change, and let's call the yearly change 5% growth , then my $100k represents something like $500k growth in the portfolio, which means growth of $400k. That's 5% of an $8M portfolio.

Both $5M and $8M seem rather substantial portfolios.

So, unless you already have a nest egg large enough to retire on, it seems as if contributions still matter, yes?

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Re: When did (will) your accumulation phase end?

Post by GerryL » Mon Feb 17, 2020 9:42 am

In my case, accumulation phase stopped in 2014 when I retired (a year earlier than planned) with a severance package and a cash stash that I intended to last for 3-4 years until I would start SS and then RMDs. I managed for that time without taking anything out of my investments -- so not really decumulating -- thanks to dividends from taxable accounts and a tiny pension.

Started SS in late 2018 and RMDs last year, so I am finally taking money out of investments, but I am back to reinvesting taxable dividends and part of the RMD, and for the time being my investments are holding steady or rising. So I guess I have not started decumulation phase yet. I know that day will come and I am prepared mentally -- I think -- to see that big bottom line start to shrink.

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Re: When did (will) your accumulation phase end?

Post by Ron » Mon Feb 17, 2020 9:58 am

Contribution phase? May 1, 2007 - the date of my retirement.

Accumulation phase? The day I die. Up to that point, my retirement investments will continue to accumulate - through increases in value due to upticks in the market, along with reinvestment of dividends/cap gains.

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Re: When did (will) your accumulation phase end?

Post by AerialWombat » Mon Feb 17, 2020 10:23 am

Even though I can (barely) scrape by from my pseudo-passive revenue streams and call myself semi-retired, the reality is that I will never truly stop actively working for money. My current 10-hour workweek can easily become 4, but I will have some active income until I’m dead, and it will likely be enough to live on.

So the portfolio I’m building will probably never be needed, and I will just continue to accumulate.

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Re: When did (will) your accumulation phase end?

Post by Third Son » Mon Feb 17, 2020 10:39 am

Thursday.... :sharebeer
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Re: When did (will) your accumulation phase end?

Post by RadAudit » Mon Feb 17, 2020 11:36 am

jco wrote:
Sun Feb 16, 2020 7:14 pm
When did you mentally shift from focusing on accumulating a bigger retirement and instead focusing on preserving what you'd already amassed? What signaled the change to you?
The big mental shift happened a little after RMDs kicked in. VG has a cute little graph that tracks purchases / withdrawals from the portfolio. It was an eye opener to see the sea of red ink flowing out of the portfolio.
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Re: When did (will) your accumulation phase end?

Post by Independent George » Mon Feb 17, 2020 3:00 pm

My accumulation phase won't quite stop until (hopefully) I'm 55, but I do expect to decelerate at age 45 (two years from now) - I'll begin my glidepath away from equity, and reduce my 401k contributions to just the match and putting the difference into my mortgage and cash. I'm debating the merits of a gradual glidepath versus dropping straight into 70/30 or 60/40 immediately once I have "enough" - I'm still leaning towards keeping the glidepath, but I won't know for sure until I get there. I might also change my mind on what constitutes "enough".

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