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Using Our Lifetime Income Model

There are many retirees and pre-retirees concerned with the current market volatility and economic uncertainty. Many are beginning to think to themselves:

· Do I have enough money to last throughout my retirement?

· Are we going to be okay with the current market conditions?

We have been helping pre-retirees and retirees develop a retirement plan based on creating reliable lifelong income using our Lifetime Income Model. This model helps efficiently decumulate your money and aims to change the definition of ROI from “return on investment” to “reliability of income”. We are currently seeing retirees living off of their savings concerned because not only has the stock market had volatility and negative returns year to date, but the bond market hasn’t been the safeguard and defensive investment it has been intended to be. With rising rates both the stock and bond market have been volatile year to date and have kept investors on the edge of their seats wondering how they will create a reliable income throughout their retirement.

In retirement you shouldn’t be concerned where your next check is coming from. You should be traveling, relaxing, and spending time with family. The Lifetime Income Model aims to help lower your stress levels and bring your confidence levels up because we are utilizing time on our side. Our process is very straight forward.

First, we want to understand what your income sources will be in retirement such as Social Security, annuities, rental income, or a note payable from selling your business. This helps us create your income floor to build out the Lifetime Income Model.

After we figure out your income floor, then we want to figure out what your monthly expenses will look like in retirement. We can figure this number in today’s dollars and inflate the expenses overtime.

The last piece of information we need to look at are your assets. Once we have determined what your assets look like, then we can put together a plan. This helps us determine which accounts will be the most efficient to draw on. For example, if you have a Roth IRA and an IRA, then we will want to drawdown the IRA before drawing down the Roth IRA due to the tax-free growth in your Roth IRA.

Once we have all of this information, we break down your retirement plan into five-year segments. Your first five years will not be exposed to the market at all. We look at fixed products such as CDs to help get a fixed return and draw your money out of a money market monthly. This is beneficial because CD rates are beginning to increase due to the interest rate increases this year.

When your first five-year segment is exhausted, then we move the second five-year segment into your no market risk segment. Each five-year segment is invested more aggressively. For example, the money you need 25 years into retirement will be invested with an aggressive growth risk tolerance because we can let time work on our side to hit our target rate of return. In comparison, the money you need during years six thru ten of retirement will be invested more conservatively to hit our target rate of return. Doing this allows us to make an ally of time instead of being fully invested in a conservative portfolio throughout retirement that may generate a 3-4% annual return to draw off of.

The Lifetime Income Model has been tested throughout the early 2000s tech crash, 2007-08 global financial crisis, and the 2020 pandemic. The model was created with a goal that allows investors to have a reliable monthly income and not make emotional decisions when the market is selling off like it has been so far this year. If you have questions or would like to chat with Ben about your retirement plan, please Schedule a Meeting Here.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. No strategy assures success or protects again loss.