A:

The final phase(s) in an investor's life cycle is the spending/gifting phase, during which wealth accumulated over many years of saving and investing is finally distributed to the owner and/or her beneficiaries. During this phase, capital preservation is paramount, although investing for growth is still a critical – though less important – piece of the puzzle.

Unlike in previous phases, where investing towards some goal was the primary concern, the spending/gifting phase places emphasis on preserving one's wealth as an income supplement and ultimately passing that wealth along to future generations. Estate planning, charitable giving and gifting all come to the fore during the spending/gifting phase.

In practical terms, the spending/gifting phase is the most difficult to navigate, as market fluctuations, interest rate movements, inflation, tax law changes and a host of other potential pitfalls can throw a monkey wrench into even the best laid of plans. As such, whereas one might have skated through with a do-it-yourself approach during the accumulation phase and consolidation phases, seeking out the help of competent attorneys, accountants and fee-only financial planners is critical in ensuring sound strategy. (For more on this, read Skipping-Out on Probate Costs and Gifting Your Retirement Assets to Charity.)

This question was answered by Justin Bynum

RELATED FAQS
  1. Should I sell my shares if a company suspends its dividend?

    Since 2008, when the Federal Reserve slashed interest rates to zero and then kept them there indefinitely, dividend-paying ... Read Full Answer >>
  2. What kind of companies in the utilities sector offer the most stable dividends for ...

    Among the companies that offer the most stable dividends for risk-averse investors are large, solidly established U.S.-based ... Read Full Answer >>
  3. What are the most popular mutual funds that give exposure to the utilities sector?

    Some of the most popular mutual funds that provide exposure to the utilities sector include American Century Utilities, Prudential ... Read Full Answer >>
  4. What dividend yield is typical for the airline sector?

    A dividend yield of 1% is typical for the airline sector. However, many airlines do not pay any dividends at all unlike other ... Read Full Answer >>
  5. How can the price of a stock change on the ex-dividend date?

    An investor looking for a dividend-paying stock has two important dates to consider when investing in a company. The first ... Read Full Answer >>
  6. What are the drawbacks of a small investor buying blue-chip stocks?

    Blue-chip stocks are generally safer for investors. However, their drawbacks for small investors include moderate growth ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    The 3 Best American Funds for the Income Seeker in 2016

    Learn about American Funds' mutual fund offerings, their past performance compared to peers and three American funds to consider for income investors.
  2. Investing Basics

    How And Why Do Companies Pay Dividends?

    The arguments for dividends include the idea that a dividend provides certainty about a company’s well being.
  3. Investing Basics

    The Top 4 Income Investments for Retirees in 2016

    These four investment types should mitigate risk in 2016 for retirees seeking income.
  4. Mutual Funds & ETFs

    The 5 Best T. Rowe Price Funds for the Income Seeker in 2016 (TROW)

    Find out which T. Rowe Price mutual funds to use to create a diversified income portfolio for current income, income growth and capital preservation.
  5. Mutual Funds & ETFs

    The 4 Best Fidelity Funds for Income Seekers in 2016

    Discover the four best fixed-income mutual funds administered and managed by Fidelity Investments suitable for income-seeking investors.
  6. Investing Basics

    4 Expensive Mutual Fund Mistakes to Avoid

    Mutual funds are a good way to balance your asset allocation but there some potentially expensive pitfalls investors need to be aware of.
  7. Mutual Funds & ETFs

    The 4 Best Vanguard Funds for Income Seekers in 2016

    Discover four mutual funds administered and managed by the Vanguard Group that would be suitable for income-seeking investors for 2016.
  8. Real Estate

    4 Real Estate Plays for Income Seekers in 2016 (CCI, HCN)

    Discover four real estate investment trusts that have favorable business developments and provide attractive dividend yields for income-seeking investors.
  9. Investing News

    Fintech Is Set to Grow in 2016 

    Based on the amount of growth sustained over the past year, the fintech industry could experience even greater growth moving into the coming year.
  10. Bonds & Fixed Income

    Vanguard Income Based Funds Overview (VOO,VPU)

    Discover the different income funds that Vanguard Investments offer, using either mutual funds or ETFs and stocks, bonds or balanced investment styles.
RELATED TERMS
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through ...
  2. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  3. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
  4. Dividend

    A distribution of a portion of a company's earnings, decided ...
  5. S&P 500 Dividend Aristocrats

    Companies that have had an increase in dividends for 25 consecutive ...
  6. UPREIT

    Short for umbrella partnership real estate investment trust, ...
Trading Center