I believe there are three main stages of a person’s financial life:

    The accumulation phase usually lasts many years, during which families are built, assets are gathered, and one or both spouses advance their careers. Income sources can include wages, business interests, investments, rentals, royalties, and possibly inheritances. The investment approach in this phase benefits from longer time horizons, which may enable greater risk tolerance and higher expected returns.

    The distribution phase usually starts at retirement, and I see this stage as the most challenging because it requires a careful balance across all parts of the financial cycle. There’s still a need to build wealth, find the best tax strategies for withdrawals, and protect assets. However, as we progress further into the financial life cycle, risk factors change—once retirement begins, income might decrease significantly. Timeframes become shorter, and worries about liquidity and inflation grow. These changing risks mean investors are generally less willing to take on risk compared to the accumulation phase. Still, lowering risk exposure often means accepting lower expected returns, which could cause long-term problems if inflation continues to outstrip investment gains.

     The preservation phase is generally associated with much lower risk tolerances due to shorter time horizons. The emphasis for those in this stage is usually keeping what they have to fulfill family transfer goals and ensuring sufficient income for possible longer life expectancies.