Download - Kol Birke & David Juliano
The Psychological Benefits and Technical Hurdles of Retirement
Income Buckets
Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced
Planning Consultant FOR BROKER/DEALER USE ONLY
Not for distribution to the public.
Agenda
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
Adapting Your Practice
Accumulation Specialist Retirement
Income Specialist
Market Loss
Inflation
Market Loss
Inflation
Outliving Assets
Health Care Costs
Adequate Survivor Income
Risks Before Retirement
Risks in Retirement
Adapting Your Practice continued
Adapting Your Practice continued
Lifetime Income
Asset Protection
Legacy Goals
Adapting Your Practice continued
Retirement Income
Planning
72(t)
Deferred Comp
Pension Plans
Social Security Annuities
IRAs & Qualified
Plans
Nonqualified Distributions
Adapting Your Practice continued
• The New ROI
Return on Investment
Reliability of Income
Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
Client Meetings
• Meeting prep • Data gathering • Presentations
Which Would You Choose?
A disease outbreak will kill 600 people. • Response A:
– Would save 200 people
• Response B: – 1/3 probability of saving everyone – 2/3 probability of saving no one
• Participants overwhelmingly chose A.
Same or Different?
Asset Allocation
Cash: 10%
Income: 30%
Growth: 60%
Buckets
3 Years of Cash
Years 3–10: Income
Years 10–30: Growth
Framing
• Exposed to equities vs. invested for potential growth
• Retirement vs. financial independence • Self-insure vs. self-fund
Louder Than Words: Nonverbal Communication
• 7% verbal (e.g., semantics) • 38% vocal (e.g., volume, pitch, rhythm) • 55% body (e.g., facial expressions, posture)
Client Meetings continued
• Meeting prep • Data gathering • Presentations
A New Model, Sort of . . .
• Define the goals. • Inventory all assets, liabilities, and
risks to income. • Identify distribution, tax, and estate issues. • Identify gaps or shortfalls.
A New Model, Sort of . . . continued
• Define the goals. • Inventory all assets, liabilities, and
risks to income. • Identify distribution, tax, and estate issues. • Identify gaps or shortfalls.
Page Header (Times 32pt)
• First line of copy (Arial 26pt) • Second line of copy
A New Model . . .
• Inventory fears. • Inventory strengths. • Inventory mistakes and lessons learned.
A New Model . . . continued
Client Meetings continued
• Meeting prep • Data gathering • Presentations
Rest and Digest Fight and Flight
Difference Between Positive and Negative
Art Aron
Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
You Have Options
• Interest only • Systematic withdrawal plan • Annuities and income riders • Hybrid strategies • Bucket approach
Bucket Approach
• Control of assets • Asset aggregation • Rebalancing tools and alerts
Bucket Approach continued
Step 1: Determine tax characteristic of accounts. • Qualified vs. nonqualified • For qualified assets:
– Some IRAs may have nondeductible money – Understand withdrawal rules (age 59½, age 70½) – May have to use 72(t) strategy
Bucket Approach continued
Step 1: Determine tax characteristic of accounts. continued
• For nonqualified assets – Ordinary income – Capital gain (short term vs. long term) – Interest (taxable and exempt) – MLPs (return of principle) – Annuities (exclusion ratio)
Bucket Approach continued
Step 2: Determine duration of each bucket. • Life expectancy • Risk tolerance • Simplicity
Bucket Approach continued
Step 3: Determine holdings in each bucket. • Cash and cash equivalents • CDs and bond ladders • Annuities • Mutual funds, equities, alternatives
Bucket Approach continued
Bucket Approach continued
Step 4: Create the paycheck. • From Bucket #1 • Transfer to a bank account • Bucket #1 replenished from Bucket #2 yield
Bucket Approach continued
Step 5: Monitor the plan. • Need to monitor each bucket • Move assets across buckets
– This can be automated, but asset movement still needs to be monitored.
• Take gains from growth buckets
Bucket Approach continued
Considerations • How many accounts for each client? • Trading costs incurred • Software tools • Staffing • Compensation
Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
Trust = Credibility + Reliability + Intimacy
Self-Interest
Unlock the Doors
The Psychological Benefits and Technical Hurdles of Retirement
Income Buckets
Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced
Planning Consultant
The further away you get from it, the more likely you’ll drown.
Your goal is your life raft.
The Goal
The Variables
The Process
Raise Awareness
Devil’s Advocate
Help Them Plan
Small Wins
Gradual Process
of the conversation? Are they leaning in or out . . .
• Body
• Voice
• Face
What Can You Use?
The Psychological Benefits and Technical Hurdles of Retirement
Income Buckets
Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced
Planning Consultant