Your Firefighter Investing Journey: Accumulation, Preservation, & Decumulation

When you think of your investing journey, the part that sticks out in most people’s minds is the accumulation stage—buying stocks, plugging money into your savings, and watching your investments grow. While this is true, it ignores two other just as essential sections of the investment lifecycle – the preservation cycle and the decumulation cycle. 

Each cycle comes with its own risks, challenges, and opportunities for optimization, but the first line of defense is being aware of each stage and its associated nuances. For firefighters, the stakes are even higher, as your investing journey will come laden with factors most other investors don’t have to consider: increased health risks, shorter careers, and a pension that may disqualify you from Social Security benefits. 

Key Takeaways

  • Firefighters face unique investment challenges, including health risks, shorter careers, and pension limitations.
  • The preservation and decumulation stages are as important as the accumulation stage.
  • Investment accounts and alternative strategies like cash-value insurance and annuities can provide guaranteed returns and income.

1: The Accumulation Stage

The accumulation stage sets the stage for your other two cycles, and as we hinted at above, this is where you see your savings grow as you earn a higher and higher salary (hopefully!). As a firefighter, you are likely contributing to a pension plan via salary deductions along with matching contributions by the city, county, or state. In retirement, you’ll receive a guaranteed lifelong pension based on various factors, including years of service, age at retirement, and your final salary. Compared to other workers, you already have a leg up on retirement planning. 

However, you don’t want to depend on your pension for several reasons, which we’ll get into later. But for now, let’s explore other accumulation strategies: 

Investment Accounts 

Just because you have a pension in place doesn’t mean you shouldn’t invest. You have a couple of options available to you with different tax statuses and structures. Firstly, you have the IRA (Individual Retirement Account), which allows you to take a tax deduction on your contributions, potentially keeping you in a lower tax bracket. Your earnings will grow tax-free until you begin taking withdrawals, at which point you’ll owe regular income tax on both the initial contributions and earnings. 

Next, there’s the Solo 401(K). This is an excellent option for firefighters who have jobs on the side. It allows for higher contribution limits compared to an IRA with the same benefits of tax-deferred growth and tax-deductible contributions. The IRA and Solo 401(K) come with Roth variants, allowing post-tax contributions and tax-free growth and withdrawals. 

Let’s not forget about the brokerage account – while it doesn’t come with the immediate tax benefits of an IRA or 401(K), you can fill it with investments that come with long-term capital gains tax rates that are generally lower than standard income rates. 

Additionally, you’ll want to keep certain investment assets in specific accounts as part of an optimized tax-alignment strategy.   

Alternative Accumulation Strategies

The issue with investment accounts is that they come with inherent risk – no investment is guaranteed, and past performance does not indicate future performance. In fact, it’s possible to experience a 100% loss. 

That’s why many look into guaranteed methods of building cash value over time, such as cash-value life insurance and annuities. 

Cash-Value Insurance

With cash-value insurance, you pay your premiums over the years, and a certain portion of your premium goes to a cash-value component, which the insurance company uses to purchase investments, such as stocks, bonds, and mutual funds. In exchange for a cap on your returns, they offer a guaranteed minimum interest rate on your cash value.  

You can then borrow against your cash value as needed, which will be deducted from your death benefit upon your passing. Keep in mind that this is a simplified overview, as there are several kinds of cash-value insurance with their own methods of building value and the types of returns you can expect to receive. 


Annuities are investment contracts between you, the investor, and insurance companies. However, their primary focus is not to provide a death benefit but to secure a fixed income, either immediately or at some point in the future. You can purchase an annuity with a lump-sum payment (popular with DROP plan lump sums) or via staggered payments. 

However, annuity distributions are counted as taxable income and could push you into a higher tax bracket and lead to costlier Medicare premiums. 

Like cash-value life insurance, your returns are capped but guaranteed. It doesn’t matter which way the wind blows; you’ll get your payments as long as you uphold your end of the deal. 

Before rushing out to purchase an annuity or policy, you should be aware that these financial products are quite complex and require expert advice and guidance to ensure you end up with a product that fits your unique financial situation. 

2. The Preservation Stage

Your prime accumulation years will last from twenty, maybe even thirty years. However, the closer to retirement you get, the more important it becomes to preserve your gains and, especially as a firefighter, your health. You want as many years in service as possible for a higher pension, so having to bow out due to health will be detrimental to your retirement readiness. If you’re able to continue working even past your retirement threshold, you may want to consider a DROP plan to further your readiness. 

As for your investments, one of the more significant risks investors face is the Sequence of Returns Risk. Basically, the first years of retirement are your riskiest – you stop earning an income and contributing to your investments and instead begin making your first withdrawals. If markets are down and you are making sizeable withdrawals, your savings may not have the momentum necessary to recover and last a full retirement. 

Therefore, you’ll want to shift away from riskier, growth-oriented investments to more stable investments such as bonds and make sure you have alternative sources of income set up in case your investments don’t pan out.

On the other hand, high-risk, high-grow-potential investments are better at fending off inflation, so they likely do deserve a place in your portfolio – you just shouldn’t depend on them.

3. The Decumulation Stage

Finally, you’re in retirement. Surprisingly enough, this can be the trickiest phase of your investment journey as you transition from a savings mindset to a careful spending mindset. And you do have to be careful – now, numerous, difficult-to-control factors come into play that can affect the longevity of your savings, such as inflation, taxes, your lifespan, and health expenses. Unfortunately, your final pension may be surprisingly low, especially if you’re forced into early retirement, which is more common for firefighters than the average profession. The earlier the retirement, the more significant influence these factors will have.

First, let’s get into inflation and your lifespan. The longer you live, the more your savings will weaken due to inflation. At only a 3% inflation rate, your savings will halve in only 24 years, and in times of high inflation, you’ll quickly feel the pinch of higher grocery bills, utilities, and gas. 

Next, there are health expenses, one of the most significant hurdles firefighters must overcome. Because many firefighters retire early, there is often a considerable gap between your retirement age and the age at which Medicare kicks in at 65. 

If your employer doesn’t offer benefits to address this insurance gap, you may be able to obtain coverage through your spouse’s workplace insurance to avoid draining your savings or paying for insurance out of your pension.

Finally, you’ll want to time your withdrawals from your investment accounts in a tax-savvy manner in accordance with your pension, annuity payments, and other sources of taxable income to help ensure you stay in a lower tax bracket and avoid unnecessary Medicare premium bumps.


A pension is a retirement plan that provides a guaranteed income for life based on factors such as years of service, age at retirement, and final salary. Firefighters typically contribute to their pension plan through salary deductions and may also receive matching contributions from their employer.

It depends. Some firefighters may be eligible for Social Security benefits in addition to their pension, while others may not, depending on their pension plan’s specific rules and employment history.

You should start planning for the decumulation phase at least 5-10 years before retirement, when you’ll need to start making important decisions about withdrawing your retirement savings and generating income to last throughout retirement.

If you leave the fire service before retirement age, you may be eligible for a deferred pension or a refund of your contributions, depending on the rules of your pension plan. However, this may also depend on how long you have been in the service and your age when you leave.

The amount you should contribute to your investment accounts depends on your financial goals, income, and expenses. A general rule of thumb is to save at from 15% – 20% of your income for retirement.

Asset allocation is the process of dividing your investments among different asset classes, such as stocks, bonds, and cash. It’s important because it helps you manage risk and optimize returns based on your investment goals and risk tolerance.

Final Thoughts

While the accumulation stage is often the most emphasized, the preservation and decumulation stages are equally important. A holistic plan considers all the factors that come with being a firefighter, including increased health risks, shorter careers, and a pension that may disqualify you from Social Security benefits.

In conclusion, your investment journey as a firefighter is like your career – more at risk, demanding, and complex. However, like your career, the path to retirement can be just as rewarding, especially with a team of professionals by your side. Click the button below if you’d like a consultation on your retirement journey and discover how we can help you prepare for the worst but plan for the best.  

The information contained in this article is for educational purposes only, this is not intended as tax, legal, or financial advice. One should always consult with the tax, legal, and financial professionals of their choosing regarding their specific situation.

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