The Big Shift

It's hard to imagine but a mere ten years ago there was little discussion about retirement income planning.  The Baby Boomers were ten years younger and the stock market was rising to the point where there was serious talk about privatizing Social Security.  Home values would always increase - it was only a matter of how much - and those steady gains could be counted on to fund a secure retirement.  The focus was on making money, not making it last.

Of course those sure things proved otherwise, The Boomers aged and today it's impossible to have a conversation about retirement without addressing income.  Consider some of the newest additions to the planning lexicon; annuitization, longevity and Monte Carlo (which was once a place you might visit in retirement).  Ultimately, dream books have been replaced by a stoicism that suggests it's not going to be a walk in the park, let alone on the Riviera, for most.

Income, not age, will trigger retirement.  But in spite of the focus on income planning, many advisors and Boomers remain at a loss. That's because transitioning a nest egg into an income stream is one of the least intuitive, but most important planning steps that we must get right.  Yet this is a generation that's been admonished since childhood not to touch the piggy bank.  In addition, product solutions are complex and  in many cases advisor / client objectives are not aligned.

Adding to the challenge is the fact that retirement income planning has no clearly defined process or end point. Accumulation planning has relative structure in the form of Modern Portfolio Theory, salary deferral, contribution limits and a point in time when you will at least stop working full time.  Income planning is more like a Picasso; abstract, open to interpretation and with no clearly defined end-point.  The goal for financial services providers is to help clients make sense of what they are looking at as they gaze at the distribution phase of retirement.

Future posts will do just.