The distribution phase is when you begin taking withdrawals from your retirement accounts to fund your living expenses—the shift from saving money to actually using it. This phase typically begins at retirement, though some people start taking distributions earlier or later, depending on their financial situation and retirement timing.

During the distribution phase, you're managing several important decisions at once. You need to determine how much to withdraw each year without depleting your savings prematurely, decide which accounts to draw from first to optimize your tax situation, coordinate distributions with Social Security benefits and any pension income, adjust your investment strategy to balance growth needs with reduced risk tolerance, and comply with required minimum distributions (RMDs) that the IRS mandates starting at age 73.

The distribution phase presents different challenges than the accumulation phase. You're withdrawing money instead of adding it, which means your account balances are more vulnerable to market downturns (known as sequence-of-returns risk). You can't simply "wait out" a bear market when you need that money for living expenses. This is why many retirees benefit from having some guaranteed income sources—like Social Security, pensions, or annuities—that provide a stable base while allowing other investments to potentially grow and recover from market volatility.