Most financial experts would agree that distribution/decumulation planning in retirement is a much more difficult planning process than during the accumulation period. Unfortunately, many retirees have unrealistic assumptions about how long they might live, often have budgeted too little for future health care needs, and are often confused by Social Security and Medicare decisions, among others.

 

Our planning process includes a retirement income planning tool that focuses on these issues, as well as spending and asset drawdowns post retirement.

 

Key aspects to keep in mind are that we are investment product agnostic, and use a time segmentation approach.

In an overly simplified nutshell, we discover through fact finding all the assets, insurance, and holdings a client has. We then begin collaborating with our client on deciding when they would like to retire and how much income they want and need.

 

Figuring prominently in these decisions are things like when to claim Social Security. All of this needs to be looked at from multiple angles, especially when planning for a couple versus an individual.

 

We take in all these inputs and supports going through multiple hypotheticals on the fly. Working through the process collaboratively with our client, we come up with calculations demonstrating the best order to liquidate assets to meet their day-to-day income needs, or possibly reposition some assets to increase safety and peace of mind, as well as plan for the unexpected.

 

Most often that unexpected comes in the form of a need for long-term care. While probably not a problem for the ultra-high-net-worth population, for everyone else it can represent a challenge, whether due to the high costs and a shortfall in assets or simply a choice of how to approach paying for care.

 

In most cases, we can say to a client, “if either one of you need care you will be able to stay in your home to receive it because we have budgeted that into your plan. However, should you need to become a resident in an assisted living or memory care facility that will be covered as well.”

 

Our software tool helps us break down the budgeting for a client including the cost of living, health care costs, expenses, and Social Security benefits. In addition, integration with a live medical database showing average costs of care by age and state is very helpful when working with our clients. We then take our client through an actual sample plan.

 

If not already retired, most of our clients are planning to retire within the next 10 years and want to go from portfolios full of target date funds, where you can’t see what’s going on in them, to a more predictable, time-segmented strategy.

We can’t predict the future but we can track the plan, and we’ll know if we get off track and know far ahead of time if we need to make changes to the client’s portfolio or their spending.