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Dec 25, 2007 8:50 pm

How do you create income for clients w/ an eye for current needs & future needs.



What are your products/processes of choice?



SPIA

Variable Annuity w/ GMWB or annuitization

Systematic withdrawal

Dividend ETF's or dividend producing stocks

Real estate(REIT's, LP's or NNN properties, etc.)

Other



How much of someone's income need will you put into a VA?



If someone has enough $$$ that they're taking 4.5% or less from their assets / yr, do you just leave it at that?

Dec 26, 2007 12:38 am

Lease Income Partnerships

Dec 26, 2007 5:33 pm

Provided they have enough (and the right kind) of life insurance, they can do the following:


SPIA (pension max)
Reverse Mortgage
GMIB
Asset Spend down
 
Along, of course, all the other strategies you posted.  Although, the more I investigate them, the more I HATE SWP's.  If there's a tough year in the market and they're taking out 4-5%, they can really put themselves in a bad spot.
Dec 26, 2007 10:34 pm
deekay:

Provided they have enough (and the right kind) of life insurance, they can do the following:

SPIA (pension max)
Reverse Mortgage
GMIB
Asset Spend down
 
Along, of course, all the other strategies you posted.  Although, the more I investigate them, the more I HATE SWP's.  If there's a tough year in the market and they're taking out 4-5%, they can really put themselves in a bad spot.



SWP's are simply dangerous if the client's portfolio is too aggressive or not properly diversified.  Plus, most people make WAY to optimistic an assumption on withdrawal rates...5% is far too high to be indefinitely sustainable.  After all, nobody knows how long they're going to live.

Dec 26, 2007 11:47 pm

Joe - you hit it right on the head. But I think that anything is 'dangerous' without diversification and the right assumptions. That goes for depending on a single business to a piece of real estate to a 50%/50% portfolio to 100% in the best annuity in the industry(for now). So, the question is what is the efficient frontier in creating income? And how does it change with time? Obviously in times of high inflation it's a very different plan than one with low inflation. It's very different for someone w/ the ability to withdraw 3% of their portfolio than someone who must withdraw 6% to keep up with their income needs. At what point do we tell clients they can retire? Do we tell some of them that they just can't? How do we know quickly when a retirement income plan is going awry?

Dec 30, 2007 4:22 pm
joedabrkr:
deekay:

Provided they have enough (and the right kind) of life insurance, they can do the following:

SPIA (pension max)
Reverse Mortgage
GMIB
Asset Spend down
 
Along, of course, all the other strategies you posted.  Although, the more I investigate them, the more I HATE SWP's.  If there's a tough year in the market and they're taking out 4-5%, they can really put themselves in a bad spot.



SWP's are simply dangerous if the client's portfolio is too aggressive or not properly diversified.  Plus, most people make WAY to optimistic an assumption on withdrawal rates...5% is far too high to be indefinitely sustainable.  After all, nobody knows how long they're going to live.


+1, Make the money you need from income not W/D!

Dec 30, 2007 5:05 pm
Ashland:

Joe - you hit it right on the head. But I think that anything is 'dangerous' without diversification and the right assumptions. That goes for depending on a single business to a piece of real estate to a 50%/50% portfolio to 100% in the best annuity in the industry(for now). So, the question is what is the efficient frontier in creating income? And how does it change with time? Obviously in times of high inflation it's a very different plan than one with low inflation. It's very different for someone w/ the ability to withdraw 3% of their portfolio than someone who must withdraw 6% to keep up with their income needs. At what point do we tell clients they can retire? Do we tell some of them that they just can't? How do we know quickly when a retirement income plan is going awry?

 
Ideally, the most efficient frontier in creating income is one that incorporates stocks (domestic, international, emerging markets), global reits, and bonds (foreign, domestic, emerging markets).
 
I don't ever tell a client that they can retire. If an unexpected major (expensive) health issue or some other issue creeps-up during retirement, I don't want to be the "bad guy" who said they could retire. Believe me, you'll get blamed if you give them the green light to retire and something out of the blue hits them in the wallet. Let them decide to make that decision, so that the blame is firmly fixed on their shoulders, if something goes wrong. I can offer a client future income projections, but the "retirement" decision is theirs alone. If pressed for an opinion, I always say "continue working". Hey, they always quit.
 
Dec 31, 2007 5:18 pm
doberman:
 
Hey, they always quit.
 
 
Correction: Hey, they can always quit.
Dec 31, 2007 6:10 pm

Good advice!