Experts: 4 retirement income strategies to match any client’s style – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Top Stories
Topics
    • Life Insurance
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Content
    • Webinars
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Free Newsletters
Sign in or register to be an INNsider.
  • INN Exclusives
  • NewsWires
  • Magazine
  • Free Newsletters
  • Insider
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Advisor News
Top Stories RSS Get our newsletter
Order Prints
June 9, 2022 Top Stories No comments
Share
Share
Tweet
Email

Experts: 4 retirement income strategies to match any client’s style

Hand businessman putting pin money into pig. Future needs loan education or mortgage credit spend vacation of dream effective buying financial risk and safety concept
By Susan Rupe

When it comes to planning for retirement income, clients face a number of risks. Each risk requires the right set of tools to manage it. And each client has their own retirement income style, which dictates the type of strategy needed to properly fund the client’s post-employment years.

How to match the right retirement income strategy to the client’s retirement income style was discussed by Wade Pfau, professor of retirement income at The American College, and Alex Murguia, CEO of RISA, during a recent webinar by the National Association for Fixed Annuities.

Retirement spending strategies

Pfau described four basic strategies to fund essential and discretionary spending in retirement:

  • Total return approach, in which a retiree holds an aggressive, diversified portfolio and takes systematic withdrawals from it.
  • Risk wrap strategy, which has a lifetime income floor built into it to fund essential spending but uses an annuity to fund discretionary spending.
  • Income protection strategy, in which a floor of essential income is built and then investing for discretionary spending.
  • Time segmentation or bucketing strategy, in which funds are invested in different vehicles for short-term and long-term spending.

A client’s style leads to specific strategies, Pfau said. He identified the dimensions that best capture a client’s retirement income style:

  • Probability based versus safety first.
  • Optionality versus commitment orientation.

A client who is probability based depends on market growth through the risk premium for stocks to outperform bonds. Clients who prefer a safety-first strategy rely on funding their essential needs with safer income such as that generated by annuities or bonds.

Clients also vary on how much plan optionality they prefer, Pfau said.

Some clients prefer flexibility to keep their options open and take advantage of new opportunities. Other clients prefer to lock in a solution that solves a lifetime income need.

RISA created a matrix that shows a role for retirement income investments based on a client’s retirement income style.

Choosing an approach

Clients who are commitment-oriented and prefer a safety-first approach need a protected income have a protected income style. Clients who have a commitment-oriented and probability-based approach are more likely to be served with a risk wrap income style. Those who want to combine optionality with a safety-first approach would most likely benefit from a time segmentation income style. A total return approach would be the best bet for clients who want optionality along with a probability-based approach.

What role do annuities play in these different approaches? Pfau explained that some approaches use annuities more for income and other approaches use annuities for growth.

In the commitment-oriented approaches, single premium immediate annuities, deferred income annuities, fixed indexed annuities, registered index-linked annuities and variable annuities can provide income. In the optionality-oriented approaches, FIAs and RILAs, as well as multiyear guaranteed annuities and investment-only variable annuities can provide growth.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.

© Entire contents copyright 2022 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

 

Older

Decentralized autonomous organizations: Health care in the metaverse

Newer

Survey: Millennials lead in having a financial advisor, stress saving

Advisor News

  • Where inflation is going to hit you the hardest
  • The Federal Reserve is raising rates. Here’s what it means for your financial future
  • Social Security: celebrate independence with Social Security
  • XML Financial Group merges with Samson Wealth Management Group
  • Teach your clients effective strategies for today’s retirement
More Advisor News

Annuity News

  • Investors Heritage launches new fixed index annuity
  • Bobby Bonilla, king of the annuity owners
  • Winning $300 million Powerball ticket purchased in Middlebury
  • Sammons names Kevin Mechtley to newly created product innovation role
  • Athene completes pension group annuity deal with Lockheed Martin
Sponsor
More Annuity News

Health/Employee Benefits News

  • Best’s Special Report: 2nd year of COVID-19 hurts health insurers’ earnings
  • Advocates call on Congress to extend health insurance subsidies before 5,000 West Virginians lose coverage
  • Democrats want to raid Medicare to pay for Obamacare – again
  • BlueCross of SC CEO retires from state's largest insurer, replacement named
  • Companies could face hurdles covering abortion travel costs
More Health/Employee Benefits News

Life Insurance

  • Penn Mutual introduces new accumulation indexed universal life
  • Alex Murdaugh, alleged hitman Smith indicted on money laundering, drug trafficking charges
  • Five people with ties to the Murdaugh family have died mysteriously
  • Wisconsin seeks policyholders of insolvent Time Insurance Co. products
  • 4 things to know about the return of premium life insurance
More Life Insurance

- Presented By -

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

FEATURED OFFERS

It’s time for John Hancock Insurance • See how our cutting-edge solutions can help you grow your life insurance business. Get to know us.
Grow your life insurance business with John Hancock • It’s time to see how our cutting-edge solutions can help you and your clients get to know us.

Press ReleasesAll press releases

  • iPipeline® Provides Advisors Excel with Unified Path Toward Accessing Core Data Analytics in Financial Services
  • iPipeline® Adds Speed of Underwriting to Quote Engine with Ethos to Deliver Insurance to Agents in Minutes
  • National Life Will Host Annual Investor Call
  • RFP #T01622
  • OneAmerica Commits $1 Million Toward Financial Literacy
Add your Press Release >

Topics

  • Life Insurance
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Content
  • Webinars
  • Monthly Focus

Top Sections

  • Life Insurance
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2022 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your INNsider Account

Not registered? Become an INNsider.