The Four Financial Life Stages

There are four common financial life stages that people strive to accomplish throughout their lifetime.  Notice we used the phrase "strive to accomplish" meaning that not everyone will make it through all four life stages.  In order, the life stages are called accumulation, preservation, distribution, wealth transfer.  Financial strategies vary greatly in each of these stages but the activities remain the same.  To learn more about each life stage keep reading.

Accumulation

Accumulation begins as one enters into the workforce but when it ends is entirely up to you.  Not everyone will make it out of the accumulation stage either because an inability or unwillingness to save.  As an activity accumulation is founded in two words earning and growing.  Creating excess income and using it in a positive manner to achieve your goals and growing your assets.  For most people, the excess income and asset growth is used to fund your retirement years and other future goals. 

Preservation

Preservation as a rule begins about five years before you wish to retire.  It is called preservation because you are at a time in your life where you should start transitioning into safer financial strategies because it would be too hard to earn everything back if you had to.  Careful planning needs to take place to ensure you have the right mix of financial strategies that will both protect your wealth and provide you with the retirement you want to have.  We refer to this as eating well and sleeping well.  As an activity, preservation refers to having the proper risk management strategies in place to protect your assets and your income.

Distribution

The distribution phase is most often called retirement or financial freedom.  It is the point in time that your assets can work for you and you have the choice whether you would like to work or not.  Retirement planning requires skilled and careful planning that is completely different than accumulation planning.  As an activity, distribution is spending your money.

Wealth Transfer

Wealth transfer can begin during your lifetime or after you pass away.  Wealth transfer is often associated with legal and estate planning.  As an activity it is ensuring your money is going where you want it to go.  Your money can be left to family (gifting) or to your favorite causes (charity).