In May, Investment News, the financial news publication, held its 2013 Retirement Income Summit, bringing together leaders from the worlds of investing, government and academia to share the latest thinking in retirement policy, Social Security, insurance, estate planning and taxation with financial professionals.
One topic covered at this year’s conference was a comparison of the two schools of thought on how to structure a portfolio designed to provide retirement income. The first is the traditional plan, transitioning assets to “safe” investments and determining a safe withdrawal rate so that a retiree’s money lasts throughout retirement. However, this plan can be impacted by economic factors, such as rising interest rates.
The second school of thought is based on what is called lifecycle finance theory. With this strategy, retirement income sources are matched to specific retirement needs. So, reliable sources, such as a pension and Social Security benefits, are calculated to ensure that a retiree’s basic needs are covered. Other less-reliable assets, such as securities, are then earmarked to provide extras and luxuries. The more a retiree wants in extras, the more risk he may be willing to take.
These two methods illuminate the different ways of approaching financial strategies. One is numbers-based, while the other is founded in a retiree’s values. As pre-retirees consider their goals for the future, this re-evaluation of how to approach an income strategy for retirement has become more prevalent. A frank discussion between consumers and their financial professionals might also be necessary to help create a strategy based on specific needs instead of focusing solely on market performance.
Just as no two retirees are alike, no two retirement income strategies should be alike, either. We’d be happy to discuss how incorporating insurance products into your income strategy can suit your needs and goals for retirement. Please give us a call.
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