kol birke & david juliano
TRANSCRIPT
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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.
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Agenda
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
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Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
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Adapting Your Practice
Accumulation Specialist Retirement
Income Specialist
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Market Loss
Inflation
Market Loss
Inflation
Outliving Assets
Health Care Costs
Adequate Survivor Income
Risks Before Retirement
Risks in Retirement
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Adapting Your Practice continued
Lifetime Income
Asset Protection
Legacy Goals
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Adapting Your Practice continued
Retirement Income
Planning
72(t)
Deferred Comp
Pension Plans
Social Security Annuities
IRAs & Qualified
Plans
Nonqualified Distributions
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Adapting Your Practice continued
• The New ROI
Return on Investment
Reliability of Income
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Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
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Client Meetings
• Meeting prep • Data gathering • Presentations
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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.
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Same or Different?
Asset Allocation
Cash: 10%
Income: 30%
Growth: 60%
Buckets
3 Years of Cash
Years 3–10: Income
Years 10–30: Growth
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Framing
• Exposed to equities vs. invested for potential growth
• Retirement vs. financial independence • Self-insure vs. self-fund
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Louder Than Words: Nonverbal Communication
• 7% verbal (e.g., semantics) • 38% vocal (e.g., volume, pitch, rhythm) • 55% body (e.g., facial expressions, posture)
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Client Meetings continued
• Meeting prep • Data gathering • Presentations
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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.
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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.
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Page Header (Times 32pt)
• First line of copy (Arial 26pt) • Second line of copy
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A New Model . . .
• Inventory fears. • Inventory strengths. • Inventory mistakes and lessons learned.
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A New Model . . . continued
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Client Meetings continued
• Meeting prep • Data gathering • Presentations
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Rest and Digest Fight and Flight
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Difference Between Positive and Negative
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Art Aron
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Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
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You Have Options
• Interest only • Systematic withdrawal plan • Annuities and income riders • Hybrid strategies • Bucket approach
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Bucket Approach
• Control of assets • Asset aggregation • Rebalancing tools and alerts
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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
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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)
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Bucket Approach continued
Step 2: Determine duration of each bucket. • Life expectancy • Risk tolerance • Simplicity
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Bucket Approach continued
Step 3: Determine holdings in each bucket. • Cash and cash equivalents • CDs and bond ladders • Annuities • Mutual funds, equities, alternatives
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Bucket Approach continued
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Bucket Approach continued
Step 4: Create the paycheck. • From Bucket #1 • Transfer to a bank account • Bucket #1 replenished from Bucket #2 yield
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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
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Bucket Approach continued
Considerations • How many accounts for each client? • Trading costs incurred • Software tools • Staffing • Compensation
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Agenda continued
• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client
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Trust = Credibility + Reliability + Intimacy
Self-Interest
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Unlock the Doors
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The Psychological Benefits and Technical Hurdles of Retirement
Income Buckets
Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced
Planning Consultant
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The further away you get from it, the more likely you’ll drown.
Your goal is your life raft.
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The Goal
The Variables
The Process
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Raise Awareness
Devil’s Advocate
Help Them Plan
Small Wins
Gradual Process
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of the conversation? Are they leaning in or out . . .
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• Body
• Voice
• Face
What Can You Use?
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The Psychological Benefits and Technical Hurdles of Retirement
Income Buckets
Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced
Planning Consultant