The financial services industry is extraordinarily good at helping people save.
Decades of product development, regulatory incentives, and advisor training have produced a sophisticated ecosystem built almost entirely around accumulation: target-date funds, 401(k) auto-enrollment, rebalancing tools, and portfolio construction technology are all solutions designed to grow assets over a working lifetime.
Once retirement arrives, most of that infrastructure stops being useful.
The decumulation gap represents one of the most consequential failures in modern financial planning.
Building for the Wrong Half of the Journey
The tools advisors use today were designed for accumulation: optimizing portfolios for growth, measuring success by returns, and defining risk as volatility over time - ideal for clients who have 30 years to recover from a down market.
Retirement inverts every assumption, changing the question from "what will this portfolio be worth in 20 years?" to "will I have enough income next month, and the month after that, for the next 30 years?"
Most advisor technology platforms aren’t designed to help answer that question.
The Scale of the Problem
More than 10,000 Americans retire every day and will continue to do so through the late 2020s as the baby boomer generation completes its exit from the workforce. Today’s retirees collectively hold over $30 trillion in retirement accounts waiting to be converted into income.
But research shows that 49% of retirees have no formal withdrawal strategy, choosing instead to withdraw what they want or need. Nearly half of all retirees are improvising one of the most consequential financial decisions of their lives.
The Persistent Bias Toward Accumulation
The structural incentives in financial services have long favored accumulation:
Decumulation, on the other hand, is harder to productize. Every client's income needs and timelines are different. Spending profiles shift, and healthcare costs are increasingly unpredictable. Building tools that account for such complexity requires a fundamentally different approach from building tools that optimize a portfolio for total return.
Annuities filled part of this void, but they carry their own trade-offs: loss of asset control, opaque pricing, limited flexibility, and surrender charges that can trap clients in products that no longer fit their circumstances. For many advisors, recommending an annuity means handing the client relationship and the assets to an insurance company.
Designing a Decumulation-First Approach
Solving the decumulation gap requires rethinking the planning process.
Income-driven portfolio construction starts with a client's spending needs and works backward to build a portfolio that funds them precisely. Defined drawdown ETFs leveraging liability-driven investing principles, and surplus optimization can all work together to create what amounts to a self-insured income stream: predictable, explainable, and fully visible to both the advisor and the client.
Leveraging a decumulation-first approach doesn’t ask clients to surrender control of their assets or lock them into insurance contracts. At the same time, it keeps the advisor at the center of the relationship while offering a framework purpose-built for the spending phase.
The Opportunity Within the Gap
The decumulation gap is a planning failure, but it also represents a massive opportunity.
Advisors who develop genuine decumulation competency will differentiate themselves in a crowded market. Clients who are within five years of retirement, or already in it, are the fastest-growing segment of the wealth management market with the highest assets and the most urgent planning needs. Right now, many of them have no plan for how to spend what they've spent decades building.
The financial services industry built powerful tools for the first half of the client journey. The second half is long overdue for the same attention.
Retirement isn’t a future event, it’s an active phase that demands a different approach.
Discover how advisors are using Income-first planning to deliver more predictable outcomes and greater client confidence.