What if the Best Retirement Strategy isn’t About Avoiding Risk?

A closer look at the ART of managing retirement income risk.

Retirement planning isn't about eliminating risk. It's about knowing where to help clients avoid, retain, or transfer risk depending on their retirement goals.

That is the thinking behind The ART of Managing Income Risk, a new eBook from American Equity designed to help financial professionals frame retirement income risk more intentionally and apply that thinking in client conversations.

The premise is simple: not every retirement risk deserves the same treatment.

The ART framework approaches retirement income risk through a different lens. It considers the role different risks play in a client's overall retirement strategy and how those risks may be managed, mitigated, or transferred.

The challenge is finding the right balance for each client.

The risks change when the paychecks stop

Once clients move from accumulating assets to taking income, the planning equation changes.

Longevity risk can stretch an income strategy across 30 years or more. Withdrawal decisions can accelerate portfolio depletion. Inflation can steadily erode purchasing power. Market volatility can become far more consequential when assets are being withdrawn. And sequence-of-returns risk can produce dramatically different outcomes for clients with otherwise similar portfolios.

The question isn't whether these risks exist. Financial professionals already know they do.

The more useful questions are: How much risk is the client willing to take on? And how can capital be allocated most efficiently to provide the income they need?

That's where the ART framework comes in.

Avoid. Retain. Transfer.

The ART approach gives financial professionals three distinct ways to address retirement income risk:

Avoid risk
For risks a client is unwilling to accept, the strategy may focus on reducing exposure and prioritizing greater certainty.

Retain risk
For risks a client is willing to assume, the portfolio can remain positioned for growth and other objectives.

Transfer risk
For risks a client would prefer not to carry, a portion may be shifted to a third party through strategies designed to provide greater income certainty.

The objective isn't to pick one. It's to determine the right combination based on the client's goals, risk tolerance, and income needs.

That distinction can change the way a financial professional approaches the entire income conversation.

Think beyond the portfolio

A retirement income strategy must do more than pursue returns.

It must produce income. It must account for how long that income may be needed. It must withstand changing market conditions. And it must leave enough flexibility to address a client's other priorities, whether that's maintaining purchasing power, preserving assets, or creating a legacy.

That means retirement assets don't necessarily have to address every income need in the same way.

For example, transferring a portion of income risk may create greater flexibility in how the remaining assets are managed. The eBook explores this concept through hypothetical scenarios that demonstrate how combining guaranteed income with managed assets can potentially change the retirement income equation.

That's where the ART framework can become particularly useful. Instead of focusing solely on the assets themselves, it shifts attention to the role those assets need to play in supporting retirement income.

That perspective can raise important questions:

"What does this client need to be certain about?"

"Where are they comfortable retaining risk?"

"Which risks could threaten their income goals if left unaddressed?"

Those questions can lead to a more purposeful allocation of assets and a more meaningful conversation with the client.

A framework you can put to work

The ART of Managing Income Risk eBook takes the framework a step further.

It examines five of the retirement income risks most likely to challenge a client's plan:

• Longevity
• Withdrawal rates
• Inflation
• Market volatility
• Sequence of returns

More importantly, it puts those risks into context with illustrations and hypothetical client scenarios, giving advisors an opportunity to see how different approaches can affect retirement income outcomes.

The goal isn't to provide a one-size-fits-all answer.

It's to give financial professionals another lens for evaluating an income strategy and another way to help clients understand why different assets may have different jobs in retirement.

When retirement assets are expected to support income, growth, flexibility, and other priorities, the way capital is allocated can become just as important as the amount of risk being taken.

A more intentional approach starts by considering what the assets need to accomplish, how much risk the client is willing to take, and where different risks may be better managed or transferred.

Master the ART of managing income risk

Download The ART of Managing Income Risk to explore the framework, review the five key retirement income risks and see practical examples that can help you think more intentionally about avoiding, retaining and transferring risk in retirement income strategies.

The more clearly you define the risks, the more confidently you can help clients plan for income that lasts.

Download the eBook

This material is for informational purposes only, and is not a recommendation to buy, sell, hold or rollover any asset. It does not take into account the specific financial circumstances, investment objectives, risk tolerance, or need of any specific person. In providing this information American Equity Investment Life Insurance Company is not acting as your fiduciary as defined by the Department of Labor. American Equity does not offer legal, investment or tax advice or make recommendations regarding insurance or investment products. Please consult a qualified professional.