The 5 Wealth Zones of Decumulation

Here’s my latest MoneySense blog, which summarizes pension consultant Don Ezra’s presentation at the most recent meeting of John Por’s Decumulation Institute. Launched in 2014, other members of the Institute include retired actuary Malcolm Hamilton, finance professor Moshe Milevsky, Black Rock Canada’s Paul Purcell, former Black Rock CEO Bill Chinery, Investor Economics’ founder Earl Bederman, Cortex Consulting’s Tom Iannucci, actuary Clive Morgan, and Michael Peskin.  I attend both as an advisory member as well as the sole media representative.

As regular Hub readers may know by now, Decumulation is the opposite of Wealth Accumulation, a topic that will become increasingly important as baby boomers start leaving paid employment and start to embrace encore careers or traditional retirement. That’s why we have devoted one of our six major blog categories to Decumulation (coupled with Downsizing):

The blog can be found by clicking the above link, or below. But for the Hub only, John contributed the following summary of the meeting:

John Por

The Advisory Group discussed how financial advisors should approach retirees to maximize their income. Don Ezra has been working on a financial modelling tool that would allow financial advisors to plan individual saving and decumulation behaviour using a top down, longevity-based, multi-tier retirement income centred framework. The Advisory Group concluded such a tool would be a great step forward but warned that such a tool could be dangerous in inexperienced  hands if the potential dangers of additional risk taking were not highlighted. Don Ezra and John Por discussed their work on the concepts of what a training program for financial advisors should contain. Jon Chevreau suggested a new certification program may be another useful step to tackle this issue.

By Jonathan Chevreau

Don Ezra (

At the most recent meeting of the Decumulation Institute (see, consultant Don Ezra unveiled a useful concept called “Wealth Zones.” (Ezra retired last year at 70 from Russell Investments but continues to be a pension consultant and advisor to the Decumulation Institute).

He showed a simple drawing of an ordinary detached home, with a basement, three stories and an attic. The labels he attached to each of these levels is a good way for near-retirees to start thinking about the inevitable transition they’ll have to make from Wealth Accumulation to Wealth Decumulation.

Pre-annuitized Wealth

In the basement is something Ezra calls Pre-annuitized Wealth, which are the normal employer DB pensions or government pensions that most people don’t usually view as Wealth. But of course once you start to draw down on CPP, OAS or in some cases the GIS, these are sources of regular income that become Wealth once they’re in your hands.

The Essentials Zone

The ground floor Ezra terms the Essentials Zone, although he adds that in some cases this too may actually turn out to be below the surface. The Essentials Zone refers to a level of wealth that is merely enough to annuitize or support life’s essentials: food, heat and utilities, rent or mortgage, etc. This level of wealth is not really discretionary: you have little choice but to divert the income generated to these unavoidable recurring expenses.

The Lifestyle Zone

Next up is the Lifestyle Zone, which is a level of wealth that is sufficient to annuitize or support a lifestyle that includes more discretionary spending, such as entertainment, cable TV, dining out, occasional travel etc. Ezra noted that the Lifestyle Zone is where most participants in employer-sponsored Defined Contribution pensions (DC plans) will probably be. (The focus of the Decumulation Institute is employer DC pensions: founder John Por believes that many DC plans are adept at Wealth Accumulation but need to help members with Decumulation or drawing an income from the plans. His clients often lose assets to alternative Decumulation services so employers should be motivated to improve Decumulation education and by so doing retain assets under administration.)

The Bequest/Comfort Zone

The third floor Ezra calls the Bequest/Comfort Zone, which will be of interest to most of the country’s wealth managers. These people have more than enough money for their own needs, both necessities and luxuries, and are beginning to think about leaving a legacy for after they are gone: inheritances for their children and immediate family and perhaps friends.

So while those on the first few levels still worry about running out of money before they run out of life, those in the Comfort Zone are pretty sure that their money will outlive them, and the issue becomes how best to distribute it.

The Endowed Zone

The top floor Ezra calls the Endowed Zone, which he dubts “the crème de la crème). This is a high level of Wealth (think Warren Buffett or Bill Gates) where all the financial needs of the immediate family and next generation are taken care of, and it’s time to think of endowments and philanthropic bequests for the world at large.


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