Wealth Accumulation versus Consumption Needs

Dr. Gerald House
4 min readAug 3, 2022


The baby boomers are still retiring at record numbers, over 10,000 per day. If we have learned anything from these new retirees, it is that the outdated wealth accumulation model has failed. Nevertheless, the old model of saving some fictitious pot of gold for our later years is still being used by most financial advisors, even though it has fallen short in meeting the needs of our seniors. So, why is the accumulation model still being administered by many financial planners and advisors? Is it because advisors fear they will lose fees if clients convert money to income-producing assets? Many financial advisors charge “assets under management” (AUM) fees to their clients, so the more assets they manage, the greater their fees. Perhaps the old habits are too difficult to break, or financial advisors and clients lack the education to transition to a cash flow model that builds reliable cash each month. Whatever the reason, we are not acting in the best interest of our clients if we do not discuss cash flow and meeting our client’s consumption needs now and in retirement.

“To everything there is a season, a time for every purpose under heaven”. (Ecclesiastes 3”1 NKJV)

Market volatility, especially after the awful year so far in equity and bond assets, has once again provided a wake-up call for retirees and pre-retirees. The recovery time for these declining assets could take months. In the financial service industry, we call this brief market decline “sequence of return risks”. Individuals moving from active employment to retirement are the most vulnerable to this type of risk because it devastates their accumulation portfolio when they need to rely on their wealth to sustain their standard of living. We must change our way of thinking and start considering cash flow and consumption needs instead of continued wealth accumulation. We need to move away from the accumulation mindset to a cash flow mindset — immediately! Advisors should address cash flow in the initial planning conversation, from paying off debt to investing in sustainable cash flow assets.

Unfortunately, we live in a day and time when the demand for worldly goods and services is out of control. We believe these goods and services are needs instead of wants. It is easy to create a mountain of debt because we buy a house that exceeds our needs, new cars with the justification as a need because of our commute to work, student loans for education, and lavish leisure activities. I have succumbed to this snare myself. Today, I am still feverishly trying to work out of this false ideology. Instead of following the world, we should rely on God’s roadmap, the Bible, to lead us to a prosperous life.

“This Book of the Law shall not depart from your mouth, but you shall meditate in it day and night, that you may observe to do according to all that is written in it. For then you will make your way prosperous, and then you will have good success.” (Joshua 1:8 NKJV)

Debt is the greatest hindrance to wealth. We cannot continue to live our lives comfortably when we are only living to pay for our last purchase. God does not tell us that debt is a sin; however, he warns us multiple times in the Bible not to become a slave to debt.

Do not be one of those who shakes hands in a pledge,
One of those who is surety for debts”; (Proverbs 22:26 NKJV)

I am not advocating ignoring the accumulation model. Just remember, it is secondary to building sustainable cash flow. Our first goal is to rid ourselves of overburdensome debt, then set up a cash flow model. Wealth accumulation then becomes just another programmed asset in our overall financial model. True financial independence is knowing our reliable cash flow will sustain our standard of living, replacing our employment income for our lifetime. Did you know that half of Warren Buffett’s Berkshire Hathaway’s dividend income alone for 2021, $2.16 billion, came from just three stocks, Apple, Bank of America, and Coke-Cola (Williams, 2021)?

We cannot wait until retirement to plan for income needs. Most retirees today do not have the luxury of retiring with a pension. Additionally, social security does not cover our consumption demands. Therefore, building a cash flow income portfolio is more important than it was 20 years ago. Do not abandon the accumulation model, just create your income portfolio first before incorporating a wealth accumulation plan.

Your faithful servant


The Holy Bible: NKJV New King James Version. (2016). Nashville, Tennessee: Holman Bible.

Williams, S. (2021, April 27). Warren Buffett generates half of his dividend income from these 3 stocks. The Motley Fool. Retrieved July 26, 2022, from https://www.fool.com/investing/2021/04/27/buffett-generates-half-dividend-income-3-stocks/