Retirement Income Style
No one approach or retirement income product works best for everyone. Understanding which strategy is best for you means knowing more about your preferences and style. Identifying your style provides an important step forward in aligning you with retirement income strategies to achieve your desired outcomes.
Adopting an approach that fails to align with your preferences can lead to a plan that is poorly implemented throughout retirement. Frequently revising a plan is a potentially costly exercise that is prone to underperformance and inefficiencies.
Your Retirement Income Style
Our Principals, Alex Murguia and Wade Pfau, developed the Retirement Income Style Awareness® or RISA® Profile, which tested and quantified the role of six separate and distinct retirement income factors that make up your retirement income style. These factors identify a range of preferences around retirement finances and directly translate into a taxonomy of specific retirement income strategies.
- Primary Factors: Identifies Your Retirement Income Style -
Probability-based vs. Safety-first
How do individuals prefer to source their retirement income from assets?
Optionality vs. Commitment
What degree of flexibility do you seek with regard to income strategies?
- Secondary Factors: Helps to Understand Retirement Decisions -
Time Based vs. Perpetuity
Retirees ultimately have two funding strategies for building retirement income floors – fund an income floor for a specific period of time, or in perpetuity.
Accumulation vs. Distribution
Wealth management has traditionally focused on growing assets without factoring in the differences that apply in retirement. It is less about maximizing after-tax returns and more about ensuring assets can sustainably support your spending goals.
Front Loading vs. Back Loading
Relates to the amount and pace of income to be received throughout retirement. It is directly linked to the tradeoffs identified by the concepts of longevity risk aversion, or the fear of outliving your assets.
True vs. Technical Liquidity
Reflects whether you have assets specifically earmarked as reserves for future unexpected events that can derail a retirement income plan.
Building a Strategy
Building a retirement income strategy involves determining how to combine retirement income tools to optimize the balance between meeting your retirement goals and protecting these goals from the unique risks of retirement.
Retirees must be comfortable with their strategies to succeed, but making sense of which tool is best for you can be daunting.
Starting with your RISA® Profile can help make sense of the plethora of competing views about how to approach retirement income planning. It will also narrow down the pool of options and help you create an “aligned” retirement income strategy.
Take the next step
towards retirement clarity.
McLean Asset Management Corp. is not an accounting firm, and no portion of the firm’s services should be construed as accounting or tax advice. The effectiveness and potential success of tax planning services depend on a variety of factors, including but not limited to the client’s tax bracket, the amount of realized and unrealized capital gains or losses, and coordination with the client’s tax and/or accounting professional(s). Blog posts linked on this page are intended for convenience, educational, and informational purposes only. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. The adviser does not endeavor to update or remove blog posts and articles after initial publication. No linked content should be construed as individualized advice or recommendations, and the discussions contained are not a substitute for investment advice from a professional adviser. This commentary should not be regarded as a complete analysis of the subjects discussed. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the adviser’s services will vary based on a variety of factors, such as the client’s investment, tax, financial circumstances, and overall objectives. Neither personalized nor tailored services, including services informed by the client’s RISA® Profile, should be construed as a guarantee of client satisfaction or a particular outcome. Past performance does not guarantee future results. All investing comes with risk, including the risk of loss.