Retirement Income Solutions

With increasingly complex and unpredictable financial markets and longer life expectancies, working with an investment professional is more important than ever. The shift from accumulation to retirement distribution strategy requires an entirely different skill set.

A successful retirement will take a solid long term strategy developed to work towards your retirement financial goals and cash flow requirements. We assist clients in defining their retirement goals and determining their cash flow requirements during retirement. You cannot really create an accurate investment plan without financial planning, even at a limited level.

Planning for you needs

While investors frequently focus more heavily on accumulating their savings, no retirement income plan would be without a well-considered withdrawal strategy. Studies indicate that the withdrawal strategy you use can be the most important factor in determining your long term success. Such a strategy can help you stick to your budget and generate tax-efficient income in the way that best meets your particular needs over a given period of time.

Create a solid withdrawal strategy

Just like no person is alike; no retirement income solution is appropriate for every retiree. Once you have a good idea of your retirement goals, it’s time to look more closely at the numbers. Specifically, you need to determine how much potential income you can expect to generate from sources like social security and employer sponsored retirement plans – versus how much income you’re likely to need in retirement. The difference is the base of a withdrawal strategy. Simply put it is the additional income that you require to fulfill your cash flow requirements. Thus a withdrawal strategy is the manner in which you design your portfolio and withdraw assets from that portfolio.

Common Withdrawal Strategies

The following is an overview of selected withdrawal strategies.

  • Buckets: Your portfolio is divided between an Investment Bucket and Income Bucket. The investment bucket is managed for total return and to provide assets for the effect of inflation or long term financial goals. The income bucket is managed to provide consistent reliable income. Typically income bucket would provide for 75% to 100% of the annual cash flow requirement.
  • Pools: Your portfolio is divided into pools to meet specific financial needs. Each pool has a unique objective, investment approach and distribution strategy. Pools typically include: guaranteed income, capital depletion, legacy goals and emergency or medical reserves.
  • Collared Withdrawals: You withdraw a base percentage of the portfolio managed to generate more than that base percentage each year. Any returns above that base can be withdrawn as a bonus and/or reinvested.
  • Fixed Percentage: You withdraw a specific percentage of the portfolio on a fixed schedule based on a sustainable rate of withdrawal. Current studies places sustainable with rate/percentage at between 3.5% and 5.5%.
  • Fixed Dollar Amount: You withdraw a specific dollar amount on a fixed schedule based on budget needs. This may or may not require liquidation of principal.
  • Total Return with Systematic Withdrawals: You invest in an actively managed portfolio designed to generate dividends, interest and capital gains. Income is distributed each month to meet the month’s income needs which may or may not include the liquidation of principal or investments. Portfolio is regularly rebalanced to maintain ideal asset allocation.
  • Dividends and Interest Only: You invest in interest paying bonds and dividend paying stocks. Interest and dividends serve as income source.

We Can Assist You .

We can assist you in choosing an appropriate withdrawal strategy based on your risk tolerance, available assets, legacy wishes and cash flow requirements. Each technique has its own advantages and disadvantages.

Of course as you live through retirement, your income needs will shift. Accordingly the withdrawal strategy you employ may need to be changed. Therefore it is important to develop a long term relationship with a financial professional that specializes in retirement income planning.

We specialize in retirement income planning and in determining which withdrawal strategy is best for your situation. Sign up for a free consultation today!

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

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