The decumulation dilemmas you might need to overcome when you retire

July 31, 2025

One of the retirement challenges many people face is how to handle wealth decumulation. During your working life, you’re typically working to increase your wealth, and this usually shifts as you enter retirement.

So, if you’re retired or are nearing the milestone, read on to find out more about decumulation dilemmas and how you might manage them.

Changing your mindset may be the first decumulation dilemma

You might expect retirement challenges to focus on your money. Yet, one of the first obstacles to overcome is often your mindset.

After decades of saving money or contributing to your pension, it can feel strange to start depleting your assets, even when you’ve built them up to fund retirement.

For some retirees struggling to change how they view their assets, they might spend retirement worrying about their finances, even though they’re secure. Alternatively, they might unnecessarily cut back and miss out on experiences they’ve been looking forward to.

Having a clear financial plan could give you the confidence to use your assets to enjoy retirement.

You may be responsible for ensuring your pension and other assets last your lifetime

Many people choose to take a flexible income from their pension to fund their retirement. While this gives you more freedom, you also need to consider how long the money needs to last. If you don’t, there’s a risk you could spend too much too soon.

It’s a common fear among modern retirees. Indeed, according to a January 2025 article in IFA Magazine, half of people over the age of 55, the equivalent of 10.5 million people, worry their retirement savings won’t last their lifetime. Just 27% said they were confident they wouldn’t run out of money.

It’s easy to see why it’s a concern for so many retirees. Your pension and other assets you use to fund retirement typically need to last for decades.

February 2025 Office for National Statistics data suggests a 65-year-old woman has an average life expectancy of 88, and a 1 in 10 chance of celebrating their 98th birthday. A 65-year-old man has an average life expectancy of 85, and a 1 in 10 chance of reaching 96.

So, to be certain you won’t run out of money, most retirees need to consider how to create an income for more than 30 years.

As part of your financial plan, a cashflow model can be valuable when you want to understand how to use your wealth in retirement. A cashflow model will show you how the value of your assets will change depending on certain assumptions, such as potential investment returns and the decisions you make.

You might use a cashflow model to answer questions like:

  • Do I have enough to retire five years earlier than planned?
  • Could I afford to increase my retirement income by £10,000 a year?
  • What would happen if I faced an unexpected expense and needed to withdraw a lump sum?

So, it could help you understand if you have “enough” and if you might run out of money during your lifetime.

It’s important to note that the outcome of a cashflow model cannot be guaranteed, and regular reviews are essential. However, it can be a valuable indicator of whether your plan may provide financial security throughout your life or if you could benefit from making adjustments.

Inflation could affect your income needs during retirement

Your income needs during retirement are unlikely to remain static. As well as your lifestyle plans, you might benefit from understanding how inflation could affect you.

The Bank of England’s (BoE) inflation calculator highlights the effect rising prices could have on your income needs throughout retirement.

Imagine you retired in 2014 and calculated that you needed your pension to provide an annual income of £25,000. A decade later, your income will need to have increased to more than £33,000 simply to maintain your spending power.

So, if you hadn’t considered inflation when reviewing your pension, you could unexpectedly find your income falls short in your later years or that you run out of money sooner than expected.

With retirements often spanning several decades, even a seemingly low rate of inflation could add up.

As a result, making inflation part of your retirement plan is often an important part of ensuring you’re depleting assets at a sustainable rate. Again, a cashflow model could be useful for understanding the effect of inflation on your income.

A retirement plan could help you manage decumulation effectively

There isn’t a one-size-fits-all solution when managing your retirement finances. Instead, a long-term tailored financial plan could help you manage decumulation and other retirement challenges in a way that reflects your priorities and situation.

Please get in touch if you’d like to arrange a meeting to talk about your retirement.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate cashflow modelling.

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