In a recent appointment with prospective clients to SFS, we were discussing the pros and cons of having us manage their investments.
Previously, these clients thought of keeping their 401(k) with their current company, even in retirement. We then brought up the Lifetime Income Plan strategy and its power to sustain someone through retirement, even through difficult markets and unexpected expenses. To this, the clients reacted with a smile, “This is great! Why doesn’t everyone do this?”
At that moment, I couldn’t help but think that’s the magic of the Lifetime Income Plan.
So, what is the Lifetime Income Plan? Put simply, it’s a strategy we deploy to ensure your assets and income can help you maintain a comfortable lifestyle throughout retirement.
The plan provides growth that can outpace inflation and distributions that are not as affected by market downturns. We have seen plenty of both of these recently. The strategy helps give you confidence when you wonder if your money will last.
How do we do it? The plan is set in motion by putting your money into multiple “buckets” or “segments.” These segments are earmarked for different phases of time in your retirement. Usually, the first is for years 1-5, the next is for years 6-10, and so on. The last segment is for 20+ years.
Each bucket is given a varying risk that correlates to the time frame. The segments that will be used sooner, like the first one, will be invested more conservatively in assets that will not fluctuate as much with the markets. On the other hand, the last bucket will be invested more aggressively to grow with the fluctuations in markets over a longer period of time. This way, the income that you need now is safer, and the assets you don’t need to draw on just yet can beat inflation. They will grow to sustain your retirement long-term.
Why do we implement the Lifetime Income Plan? Well, because despite our best wishes, the market does not move in a straight line. You might be surprised to find out that, although the market has gone up 7-8% annually on average, there are good and bad years.
In some years, the market gains 21%; in others, it loses 18%, for example. This strategy is built for both situations. Good years are just that, good years. After the bad years, the more conservative accounts have been protected and can be drawn on for income. Your more aggressive accounts lose in the short term, but they have time to come back in the long run.
Then, for all the times that are not so good, it pays to have the peace of mind that you are still on track. With the Lifetime Income Plan, we can confidently say you and your money are going to be okay.
Listen to a deep dive into Lifetime Income Planning on the Power Up Wealth podcast.
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