addressing life issues
Improve your skills in retirement, protection planning and care management to strengthen your relationships with clients.
Income Generation
Transition into Retirement
During your clients' working years, high risk and long term investments are more doable. They have time to recover from a loss and some protection from inflation through an increase in wages.
However, as your clients age and enter their spending years, the objective changes. The goal is then to generate sufficient income in order to maintain their chosen lifestyle and extend their assets to last as long as they do.
How, then, should you manage your clients' investments during this transition? The answer is different for every client and requires you carefully balance income from retirement assets, protection requirements, and depletion of assets.
Choosing a sustainable withdrawal rate
One of the key elements that determines whether your client's assets will last for his/her lifetime is the withdrawal rate of funds. An optimal withdrawal rate takes into account the value of current assets, expected rate of return, life expectancy, risk tolerance, adjustments for inflation, how much expenses are expected to be, and whether your client wants to leave something behind.
Balancing safety and growth
To ensure a consistent and reliable flow of income for your client's lifetime, their principal or assets must be made secure. This is why many shift a portion of their investment portfolio to more secure income-producing investments, when they begin to transition into retirement. Unfortunately, safety comes with a price. It reduces growth potential and does not protect against the affects of inflation.
Counseling your clients to strike a reasonable balance between safety and growth will help them navigate this difficult transition.