Decumulation strategies are evolving — here's what advisors are doing differently

Retirement income planning — what the industry calls decumulation — is undergoing its most significant rethink in years. With Gen X entering retirement in growing numbers, interest rates at levels not seen in over a decade, and equity markets posting strong gains, financial advisors across the U.S. say the old playbook is no longer enough. The shift is away from static withdrawal rules and toward flexible, tax-integrated income strategies that adapt as markets and client lives change.

From withdrawal rates to living income plans

Justin Fitzpatrick, president and co-founder of Income Lab, a retirement income software firm based in the United States, prefers to reframe the conversation entirely. He avoids the term "decumulation" in favor of "distribution" — because the real job, he argues, is turning a portfolio into a reliable retirement paycheck, not simply drawing it down.

Higher interest rates have handed advisors a tool they largely lacked for the better part of a decade. High-quality bonds, inflation-protected Treasuries, and income annuities now pay meaningful yields again, which means a durable income stream no longer depends as heavily on equity risk as it once did. At the same time, longer lifespans are stretching retirement horizons, making any single static assumption more fragile over time.

"The biggest shift for me is away from solving a plan once and grading it with a probability-of-success score, and toward a living plan that gets monitored and adjusted with small course-corrections as life and markets move," Fitzpatrick said. "Retirees have a superpower most models ignore, which is their ability to adjust; build around that, and higher rates and longer lifespans become variables you manage rather than risks that quietly break the plan."

Fitzpatrick is also direct about what the industry gets wrong. Bill Bengen's 4% rule — long the default anchor for retirement income planning — was a genuine analytical breakthrough, he says, but as a real-world strategy it falls short. Retirement spending is not constant: Social Security switches on at different ages, mortgages get paid off, and unexpected expenses arise. A rigid withdrawal rate fails to account for any of that.

He is equally pointed about a mistake that rarely gets named: over-caution. "Good savers build in so much cushion that they underspend for decades and never get the retirement they worked for," Fitzpatrick said. "The risk of spending the wrong amount runs in both directions."

The bucket approach and sequence-of-returns risk

Troy Davidson, wealth advisor at Ballast Rock Private Wealth, a U.S.-based registered investment advisory firm, says the starting point for decumulation conversations has changed fundamentally. Where advisors once began with a withdrawal rate percentage and derived a monthly figure from there, the conversation now opens with lifestyle, flexibility, and actual cash flow needs.

Davidson uses a three-bucket structure to manage what planners call sequence-of-returns risk — the danger that a market downturn in the early years of retirement can do lasting damage to a portfolio that a similar downturn a decade later would not.

"We work with our clients to create enough short-term safe and liquid assets to cover their more immediate needs," Davidson said. "The middle bucket carries diversified fixed income and equity for growth over a five to ten year horizon, and allows for flexibility if unexpected needs arise or larger goals are on the horizon."

The third bucket, he explains, may include access to private market investments where appropriate — providing diversification, long-term growth potential, and returns that are less correlated to public markets. The combination, in his view, allows clients to navigate a wide range of market conditions while adjusting as circumstances change.

On the client communication side, Davidson leads with detailed, customized financial plans rather than longevity risk as a fear tactic. "When clients can see that longevity risk has already been priced into the design of their portfolio, the conversation shifts from anxiety to confidence," he said. "Our job at Ballast Rock is to make sure the plan is doing the worrying, not the client."

Tax coordination and the pre-retirement window

Jamie Hopkins, chief executive officer at Bryn Mawr Trust, a wealth management firm headquartered in Bryn Mawr, Pennsylvania, describes his approach to decumulation as increasingly dynamic and tax-focused. For Hopkins, the question is no longer simply which account to draw from first — it is how to coordinate investments, taxes, Social Security, Medicare, estate planning, and lifestyle goals into one integrated strategy.

Technology is accelerating that coordination. Hopkins notes that planning software now allows advisors to model tax outcomes across multiple accounts and income sources with a precision that was not feasible even a few years ago.

He is also sharply critical of advisors who wait until a client reaches retirement to begin decumulation planning. "Some of the most valuable planning opportunities — Roth conversions, timing Social Security, managing capital gains, or filling lower tax brackets — often happen in the years leading up to retirement," Hopkins said.

Hopkins also pushes back on the instinct to frame retirement planning around the fear of running out of money. The more accurate risk, he argues, is having to make unwanted changes later in life — cutting spending, delaying goals, or adjusting a lifestyle — because the original plan lacked adaptability. "Retirement isn't a pass/fail test," Hopkins said. "It is about flexibility and adaptability."

His firm explored these ideas in Your Retirement Sketchbook, a planning resource that uses visualization to help clients picture their retirement in concrete terms — an approach Hopkins believes makes it significantly easier to build an income strategy around how people actually want to live, rather than around a target account balance.