Making retirement income last a lifetime
"I have a client who wants to know how to ensure he/she does not run out of money during retirement"...What a planner needs to understand about spending retirement income (decumulation).
Why choose the flooring approach to retirement income planning
(Edward E. Graves and Tom Hegna and David A. Littell, JD, ChFC®, CFP®)
Tom Hegna, author of Paychecks and Playchecks, makes the case for the importance of building an income floor into a retirement income plan.
How does life cycle finance theory affect retirement income planning?
(David A. Littell, JD, ChFC®, CFP® and Wade D. Pfau, PhD, CFA)
In this video, Wade Pfau discusses life cycle finance theory as it applies to retirement income planning, some of the research findings using this approach, and the types of retirement income strategies that are supported by this theory.
What are the three approaches advisors are using when counseling clients about retirement income planning?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We discuss the systematic withdrawal approach, the "bucket strategy" approach, and the "essential vs. discretionary" approach to retirement income planning. We learn that the bucket strategy is a complimentary derivation of the systematic withdrawal strategy. We also learn the advantages and disadvantages of annuitizing essential expenses.
How can a planner use marginal analysis?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We learn about the advantages of using marginal analysis when deciding on retirement income strategies. We illustrate marginal analysis by looking at the trade-offs with a GMWB deferred annuity.
What are some lesser known retirement income planning considerations?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We discuss the fixed income element of the portfolio, the impact of market volatility on generation 'Y', and the need to involve financial planners in the retirement income process. We learn that high-grade bonds are needed to match the research on sustainable withdrawal rates. We also learn it is not just about time horizon for generation 'Y' , but also about risk tolerance. We also learn the importance of a financial planner to the retirement income process.
What are the available options for a client looking to tap their savings for retirement living?
(John Ameriks, PhD and Kenn Beam Tacchino, JD, LLM )
A review of the variety of options for liquidating a savings portfolio. We learn the various drawndown strategies available and the merits of each strategy.
How does the fixed payment immediate annuity strategy work and what are its advantages and disadvantages?
(Garth A. Bernard and Kenn Beam Tacchino, JD, LLM and Mark J. Warshawsky )
We review using a fixed immediate annuity as the sole drawdown option. We learn about the tradeoff between eliminating longevity risk and illiquidity.
How does the immediate variable annuity for life strategy work and what are its advantages and disadvantages?
(Garth A. Bernard and Kenn Beam Tacchino, JD, LLM and Mark J. Warshawsky )
We review using an immediate variable annuity and a deferred variable annuity with guaranteed minimum withdrawal benefits (VA GMWB) as the method for drawing down retirement benefits. We learn the advantages and disadvantages of both strategies.
How does the combination of withdrawals from mutual funds and fixed payments from an annuity strategy work and what are its advantages and disadvantages?
(Garth A. Bernard and Kenn Beam Tacchino, JD, LLM and Mark J. Warshawsky )
We look at combining systematic withdrawals and an annuity as a drawdown strategy. We learn that combining two strategies allows the client to rely on the strength of a product and also minimize its disadvantages.
Which fundamental withdrawal strategy (or combination of strategies) is best for my client?
(Garth A. Bernard and Kenn Beam Tacchino, JD, LLM and Mark J. Warshawsky )
We compare six common withdrawal strategies. We learn the advantages and disadvantages of one strategy over another.
What products work best with the bucket approach to retirement income?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and David A. Littell, JD, ChFC®, CFP® and Craig W. Lemoine, CFP®)
We examine how to build a portfolio using the bucket approach. We analyze how a variety of products fit.
How does the flooring approach to retirement income planning work and how is this strategy executed?
(Curtis V. Cloke, CLTC, LUTCF and David A. Littell, JD, ChFC®, CFP®)
We discuss how to explain flooring to the client. We learn about essential and extra income.
What is the safe withdrawal rate strategy?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We examine the research about safe harbor withdrawal rates. We learn that four percent is not the magic number!
What is the difference between the initial withdrawal rate and the current withdrawal rate?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We discuss an important part of the systematic withdrawal process. We learn how to set the initial and current withdrawal rate.
What happens if the client outlives the systematic withdrawal rate time horizon?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We discuss setting the safe withdrawal rate time horizon. We learn that several safeguards are in place even if a client outlives the chosen time horizon.
How do sustainable withdrawal rates apply to the middle class?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We discuss retirement planning for the middle class. We learn about the increased need to focus on the expense side as opposed to the income side.
What is the traditional thinking about sustainable withdrawal rates?
(Kenn Beam Tacchino, JD, LLM and Walt Woerheide, PhD, CFP® and Moshe Milevsky, Ph.D.)
An examination of expert thinking about the percentage of portfolio savings that can be spent annually during retirement without depleting the portfolio. We learn how much can be withdrawn for a sustainable withdrawal rate.
What is a traditional systematic withdrawal program and what are some of its fundamental flaws?
(Garth A. Bernard and Kenn Beam Tacchino, JD, LLM and Mark J. Warshawsky )
We review the flaws in the systematic withdrawal strategy. We learn that some withdrawals are not related to the underlying portfolio. This subjects clients to market risk, depletion risk, longevity risk and legacy shortfall risk.
What is the impact of annuities on retirement ruin?
(Kenn Beam Tacchino, JD, LLM and Walt Woerheide, PhD, CFP® and Moshe Milevsky, Ph.D.)
A look at how an immediate annuity can reduce the risk that a client will run out of money in retirement (referred to as retirement ruin). We learn why partial annuitization is crucial to retirement security.
What has recent research shown about the affect of annuities on the sustainability of a retirement portfolio?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM )
We discuss some recent research showing that lifetime annuities and deferred annuities with guaranteed life time benefits can reduce the risk of portfolio failure. We learn that there are tradeoffs between growing wealth and securing current income and that certain strategies are better at balancing both objectives.
What is the impact of longevity and investment allocation on sustaining income throughout retirement?
(Kenn Beam Tacchino, JD, LLM and Walt Woerheide, PhD, CFP® and Moshe Milevsky, Ph.D.)
A look at time horizon and optimal asset allocation when determining a portfolios failure rate. We learn that product allocation can be just as important as asset allocation.
What is the impact of glide path on the success of a retirement portfolio?
(Kenn Beam Tacchino, JD, LLM and Walt Woerheide, PhD, CFP® and Moshe Milevsky, Ph.D.)
An analysis of how the change in equity allocation over time affects retirement portfolio sustainability. We learn that equity reduction throughout retirement may not be optimal and that standard deviation, not just the probability of portfolio ruin, should be considered as a measure of a clients risk.
What is the safe withdrawal rate based on current market conditions?
(David A. Littell, JD, ChFC®, CFP® and Wade D. Pfau, PhD, CFA)
We look at how the 4 percent rule worked in other countries and we compare historical returns to future projected returns. We learn that viewing the 4 percent rule through an international or future rates "lens" reveals some interesting insights about the 4 percent rule.
What investment products should be used for the systematic withdrawal approach?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and David A. Littell, JD, ChFC®, CFP® and Craig W. Lemoine, CFP®)
We look at products planners may use for systematic withdrawals. We analyze how a variety of choices fit.
What are the strategies that can be used to modify the systematic withdrawal technique when volatile market conditions occur?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We discuss when and how to change systematic withdrawals creating retirement income. We learn that when market conditions change by specified percentages, adjustments need to be made to the systematic withdrawal rate.
How can the planner monitor sustainability of retirement income for her client?
(Kenn Beam Tacchino, JD, LLM and Walt Woerheide, PhD, CFP® and Moshe Milevsky, Ph.D.)
An analysis of a calculation (risquotient) that can indicate the degree of risk a client has for running out of savings during retirement. We learn how to recognize if a clients income is in jeopardy.
How can the planner monitor whether the client’s withdrawal sustainability is susceptible to unusual market conditions?
(Kenn Beam Tacchino, JD, LLM and Moshe Milevsky, Ph.D.)
This discussion looks beyond traditional portfolio failure analysis to invent a warning signal for when a clients situation is likely to change. We learn how to determine if a clients sustainability number is stable by calculating a SORDEX. Most importantly this calculation tells us how often to meet with clients.
How do you build an income floor with bonds?
(Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and David A. Littell, JD, ChFC®, CFP®)
We look at income flooring using a bond ladder. We learn about a variety of strategies including using government bonds, using SPLITs, and using SPLITs of TIPs.
What is the most efficient order of distributions from qualified plans and IRAs, Roth accounts, and taxable investments?
(David A. Littell, JD, ChFC®, CFP® and Walt Woerheide, PhD, CFP®)
We learn about some income tax ordering considerations for determining which type of account to withdraw from first in retirement.
What are safety stock plans and bond ladders?
(Kenn Beam Tacchino, JD, LLM and Walt Woerheide, PhD, CFP®)
A discussion of two common strategies that can sustain retirement income. We learn ways to minimize the affect of a down market when taking retirement withdrawals.
What are some strategies for using home equity in the decumulation phase of retirement?
(Dr. Barbara Stucki, Ph.D. and David A. Littell, JD, ChFC®, CFP®)
In this video we discuss the NCOA and MetLife Study, Tapping Home Equity in Retirement. We learn about using home equity to increase retirement income, defer payment of a mortgage, or as an emergency fund to cover important expenses that allow a retiree to remain in the home.
What can be done if a client spends too much or too little during retirement?
(Kenn Beam Tacchino, JD, LLM and Somnath Basu, Ph.D. and Joshua Weiner, Ph.D.)
Building a managed payout fund: Features and concerns
(John Ameriks, PhD and David A. Littell, JD, ChFC®, CFP®)
In this third and final video in the series on managed payout funds, John Ameriks of Vanguard discusses the issues involved in building a portfolio to support a predictable distribution stream from a managed payout fund. This video is interesting for anyone building a retirement income portfolio and determining an appropriate payout rate.
Range of options for managed payout funds
(John Ameriks, PhD and David A. Littell, JD, ChFC®, CFP®)
In the second of three videos, John Ameriks of Vanguard discusses the different approaches investment companies have taken in constructing managed payout funds.
Understanding the issue: Managed payout funds
(John Ameriks, PhD and David A. Littell, JD, ChFC®, CFP®)
In the last few years, mutual fund companies have begun to offer managed payout funds which are intended to provide a single mutual fund solution for generating a predictable income stream in retirement. In this first of three interviews, John Ameriks of Vanguard discusses generally how these funds work.
Investing for income in today's environment
(Colleen M. Jaconetti and David A. Littell, JD, ChFC®, CFP®)
In this interesting video with Colleen Jaconetti of Vanguard we discuss the difficulties of using an income strategy with a retirement income portfolio in today’s low yield environment. We discuss the implications of altering the portfolio to increase yields and why today a total returns approach may be the better option.
What is tactical asset allocation and why is it popular?
(David Nanigian, Ph.D. and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and David A. Littell, JD, ChFC®, CFP®)
As the title implies, Kitces and Nanigian describe tactical asset allocation, why it is different than strategic asset allocation, and why it is popular in today's investment environment.
What is the risk/return paradigm for retirement income planning?
(David A. Littell, JD, ChFC®, CFP® and Walt Woerheide, PhD, CFP®)
In this video, Walt Woerheide explains the significant shift in the risk/return paradigm that occurs when an individual switches from accumulation (saving for retirement) to decumulation (taking withdrawals from the retirement income plan).
What is a withdrawal policy statement?
(Jonathan Guyton, CFP® and Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ and Kenn Beam Tacchino, JD, LLM )
We discuss how a withdrawal policy statement can help to give clients perspective in a financial storm. We learn that a discretionary fund can help the client avoid the mistake of "raiding the portfolio".
How can a retirement portfolio be constructed to match the changing expense patterns during retirement?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Somnath Basu, Ph.D.)
We discuss appropriate portfolio construction consistent with the age banding approach to dividing expenses into multiple age bands in retirement.
What is the theory behind dividing a retirement portfolio into multiple sub portfolios?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Somnath Basu, Ph.D.)
We discuss what we are trying to accomplish by dividing a retirement portfolio into a number of age bands the types of concerns that this strategy addresses.
With the multiple retirement portfolio approach, how should portfolios be reallocated over time?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Somnath Basu, Ph.D.)
We discuss managing multiple retirement portfolios over time.
The opinions presented in these videos are those of the speakers, and do not necessarily represent the opinions or policies of New York Life. New York Life makes no warranties or representations about the accuracy or completeness of the statements made in this video, or any associated materials appearing on The American College website and assumes no liability for damages resulting from the use of the information contained therein. New York Life is not engaged in rendering legal, accounting, or other professional advice through the use of this video or associated materials. If legal or other expert advice is required, the services of an appropriate professional should be sought.
