The Principal Compares A Bucket Strategy With A Systematic Withdrawal Strategy

New analysis from The Principal compares a bucket strategy with a systematic withdrawal strategy

DES MOINES, Iowa--(BUSINESS WIRE)-- Financial professionals who are prepared to help retiring clients develop a strategy for turning savings into a lifetime income stand to tap into a huge market opportunity. Eighty percent of pre-retirees don’t have a written retirement plan, but 50 percent say they plan to work with a financial professional to develop one¹.

<p> To help financial professionals determine which approach is right for each retiree, the Principal Financial Group^® is unveiling a new analysis of two common retirement income strategies.

Income Distribution: Comparing a Bucket Strategy and a Systematic Withdrawal Strategy compares the psychological and economic benefits of a bucket strategy to benefits associated with a periodic withdrawal strategy. The information presented may change the way financial professionals think about each approach – and why they may choose one or the other for their clients.

“There is no one-size-fits-all approach to retirement income. Every retiree’s situation is different but evaluating to determine which could be the right strategy is complex and time consuming,” said Jerry Patterson, senior vice president of retirement and investor services. “Financial professionals can play a critical role during the transition to retirement. This new analysis offers them an easier way to evaluate the pros and cons of two common retirement income distribution methods.”

The white paper compares the benefits and shortfalls of the bucket strategy, which groups retirement assets by the time horizon in which they will be used, with a more popular and simple approach – periodic withdrawals from an age-appropriate portfolio. The analysis:

• Looks at the complexity of each strategy
• Evaluates psychological and economic benefits of each approach
• Explains why each strategy offers potential benefits and shortfalls, with focus on how certain funds reallocate over time

The paper summarizes the benefits and shortfalls of each strategy in an easy-to-use chart.

“Equipped with the findings from this paper, financial professionals will be better prepared to help their clients structure a well-designed retirement income strategy to suit their unique retirement needs,” said Patterson.

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About the Principal Financial Group
The Principal Financial Group^® (The Principal ^®)² is a global investment management leader including retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500^®, the Principal Financial Group has $335.0 billion in assets under management³ and serves some 18.0 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

Links:
https://secure02.principal.com/publicvsupply/GetFile?fm=PQ10855&ty=VOP&EXT=.VOP

Investors should carefully consider a mutual fund’s investment objectives, risks, charges, and expenses prior to investing. A prospectus, or summary prospectus if available, containing this and other information can be obtained by contacting a financial professional, visiting principal.com or calling 800-547-7754. Read the prospectus carefully before investing.

Investment options are subject to investment risk. Shares or unit values will fluctuate and investments, when redeemed, may be worth more or less than their original cost.

Target-date funds may not provide adequate income in retirement.

No one can predict what the market will do tomorrow or at any time in the future.

IMPORTANT: The projections or simulations regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The results may vary over time.

Insurance products and plan administrative services, if applicable, are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 800-547-7754, member SIPC and/or independent broker/dealers. Securities sold by a Princor Registered Representative are offered through Princor®. Princor and Principal Life are members of the Principal Financial Group®, Des Moines, IA 50392. Certain investment options may not be available in all states or U.S. commonwealths.

¹Principal Financial Group Pre-Retiree Survey, Spring 2011

² “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.

³ As of Dec. 31, 2011.

Principal Financial Group Terri Hale, 515-283-8858
[email protected]
or Joelle Kirchhoff, 515-246-4907
[email protected]

Source: Principal Financial Group