Smoothing Out the Bumps in Retirement Income

Smoothing Out the Bumps in Retirement Income

Our featured author, Matthew R. Teel, senior VP at Barnum Financial Group, says the market volatility of late last year drove many an anxious discussion between advisors and clients on the possible need for adjustments to retirement planning.

It’s good to know these important talks are taking place: retirement issues are infamous for getting swept under the rug. Still, in times of intense concern, it’s good to exercise caution. The natural swings of markets, even the nausea-inducing variety, don’t necessarily signal the need for radical changes in a retirement funding strategy. Indeed, volatility can be your friend, presenting opportunities to those who are prepared and know how to keep their heads.

What clients want is a predictable retirement income, our author says. Sustainable withdrawal rates are the goal and at his firm, historical data and Monte Carlo testing are the means for achieving them. There are some problems to consider, though.

How long do you plan to live? This dire question must have an answer, because without one, you can’t plan at all. If you estimate 35 years of retirement living, and only manage 10 years, you might feel bitter (if that’s possible in the great beyond). If only you’d known, you could have taken a bigger annual income and had a more comfortable lifestyle. It works the other way, too: live too long and you’ll run out of money.

What can you do to respond? One author suggests creating a retirement portfolio comprising investments, life insurance and annuities to provide income. At retirement, a client should buy a single-premium annuity to provide income for as long as he or she lives. If death comes unexpectedly, the life insurance is there to provide for any heirs and expenses.


For more information, please read:
Making Retirement Income More Predictable | ThinkAdvisor


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