Decumulation or spending phase

For most of working life, income arrives every month and some of it is set aside — this is the accumulation phase. At some point, that flow reverses. Income stops, or slows sharply, and money instead has to come out of the investments that were built up.

The workbook calls this the decumulation, or spending, phase. It usually begins at retirement. Because there is no longer a salary to fall back on, and going back to work is unlikely, the priority shifts. Stability of the portfolio, and a dependable stream of income from it, matter more than chasing further growth.

The workbook places this phase inside a longer life-cycle sequence: an early accumulation stage, a mid-career consolidation stage where income exceeds expenses and the portfolio starts balancing growth against capital preservation, then decumulation, and finally a gifting phase once a person has more assets than they will ever need to spend.

During decumulation, the preference is for investments that generate dividend, interest and rental income — cash the household can actually live on. But the workbook adds a detail that surprises many candidates: because a retiree's remaining time horizon can still run to 15 or 20 years, part of the portfolio has to keep some growth and inflation-hedge potential even after retirement, rather than moving entirely into safe, low-yielding assets.

Illustrative. Mrs Iyer retires at 60 with a retirement corpus of Rs 1,20,00,000. She now needs the corpus to pay her monthly expenses instead of a salary — she has entered the decumulation phase.

Her adviser splits the corpus: roughly Rs 80,00,000 goes into dividend-paying blue-chip stocks, bonds and rental property that together generate steady monthly cash flow, and the remaining Rs 40,00,000 stays in growth-oriented equity, because Mrs Iyer's own life expectancy gives her a time horizon of close to 20 more years — long enough that some of the corpus still needs to outpace inflation, not just sit still.

Chapter 15 (Portfolio Construction Process), section 15.11 (life cycle analysis of investor), defines the decumulation/spending phase between the consolidation and gifting phases. Expect a scenario naming a client's stage in life and asking which life-cycle phase it represents, or a question on why a retiree's portfolio still needs some growth exposure.

• Decumulation is not the same as "all safe assets." The workbook explicitly keeps some growth and inflation-hedge exposure in this phase because the time horizon can still be 15–20 years.
• The boundaries between life-cycle phases are fuzzy, in the workbook's own words — do not expect a hard age cut-off between consolidation and decumulation.
• Do not confuse this with the gifting phase, which comes after decumulation and is about having more than enough, not about funding living expenses.