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Which option is a better path for you?

The retirement income path you should ultimately choose depends on a number of factors including your retirement priorities, your health and your life expectancy.

If you are in your mid-60s and in good health, your life expectancy may be 20 years more — and you would have a 50% chance of outliving your resources. With the more conservative spending level in Option 2, your portfolio is projected to last 30 years, which provides reasonable assurance that you will not outlive your resources. We can help you visualize this and other tradeoffs.

 

Discounter Brokers – Their advice tends to be “cookie cutter” and prescribed such that everyone receives similar recommendations.

Financial Planners – Not all people claiming to be financial planners are certified as such. Make sure you find a true planner who is compensated for just financial planning.

RIA (Registered Investment Advisor) – This is the best advisor type for you since all registered investment advisors are fiduciaries. These advisors are required to put your interests before their own.

How do you know the best approach for you?

Compare & Decide

You can only select what’s best for you if you are able to compare your options. There are many retirement income strategies being advertised, and you should be able to analyze how your assets would fare with each strategy.

You may have a current strategy recommended by an advisor, or you may be interested in a product such as an annuity. Regardless, you should be able to transparently evaluate for yourself different products and approaches to generating retirement income. You should be able to see, given a range of market conditions and tax scenarios, how much income your assets will generate and how long that income can be reasonably expected to last.


A number of factors can impact the strategy most appropriate for you including:

How much income you create
Where you take the money from to generate the income across your resources
The products and vehicles you use to construct your withdrawal strategy (i.e., securities, annuities, Roth, IRA, etc.)
Trade-offs such as assuming more portfolio risk, part-time employment, or lowering expenses.

Strategies You Might Be Considering

Buckets of Money

Buckets of Money and Other Managed Strategies

Most advisors are unprepared to compare withdrawal strategies and are focused solely on the single approach developed by their own firm. Many firms promote the “buckets of money” approach. You should be able to visually see the difference of tapping one product or account before another. You should be able to compare “buckets of money” with an actively managed approach that is smart, flexible and tax-efficient.

Guaranteed Income

Guaranteed Income

“Guaranteed income” from an annuity may be a good choice for you if you understand the added risks and costs.

For gaining the benefit of income backed by an insurance company, you lose the liquidity of the assets you have relinquished to the insurance company. Once you annuitize, you can never get the money back. You must compare how generating income from the same allocated assets compares to income from the annuity.

Compare different scenarios with and without immediate annuities to make sure you understand the longevity of your assets and associated income. Make sure you ask yourself how you will feel under these different scenarios in the face of change. allowing you to select the best withdrawal strategy for you.

4% Rule

The 4% Rule and Replacement Ratios

“Rules of thumb,” such as “only take our 4% of your money” or “you need to replace 80% of your pre-retirement income,” are overly simplified. While they may serve as a good starting point, life rarely aligns to these rules. Your income needs will typically will change over your retirement horizon as your lifestyle and level of activity changes.

A withdrawal strategy that looks across all your assets and is tax efficient, withdrawing assets strategically to maximize longevity, is dynamic and flexible.

It may be helpful to use a rule of thumb to start constructing your strategy, but it becomes apparent that you will want to customize your withdrawals based on your specific situation.

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