Kol Birke & David Juliano

The Psychological Benefits and Technical Hurdles of Retirement

Income Buckets

Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced

Planning Consultant FOR BROKER/DEALER USE ONLY

Not for distribution to the public.

Agenda

• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client

Agenda continued

• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client

Adapting Your Practice

Accumulation Specialist Retirement

Income Specialist

Market Loss

Inflation

Market Loss

Inflation

Outliving Assets

Health Care Costs

Adequate Survivor Income

Risks Before Retirement

Risks in Retirement

Adapting Your Practice continued

Adapting Your Practice continued

Lifetime Income

Asset Protection

Legacy Goals

Adapting Your Practice continued

Retirement Income

Planning

72(t)

Deferred Comp

Pension Plans

Social Security Annuities

IRAs & Qualified

Plans

Nonqualified Distributions

Adapting Your Practice continued

• The New ROI

Return on Investment

Reliability of Income

Agenda continued

• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client

Client Meetings

• Meeting prep • Data gathering • Presentations

Which Would You Choose?

A disease outbreak will kill 600 people. • Response A:

– Would save 200 people

• Response B: – 1/3 probability of saving everyone – 2/3 probability of saving no one

• Participants overwhelmingly chose A.

Same or Different?

Asset Allocation

Cash: 10%

Income: 30%

Growth: 60%

Buckets

3 Years of Cash

Years 3–10: Income

Years 10–30: Growth

Framing

• Exposed to equities vs. invested for potential growth

• Retirement vs. financial independence • Self-insure vs. self-fund

Louder Than Words: Nonverbal Communication

• 7% verbal (e.g., semantics) • 38% vocal (e.g., volume, pitch, rhythm) • 55% body (e.g., facial expressions, posture)

Client Meetings continued

• Meeting prep • Data gathering • Presentations

A New Model, Sort of . . .

• Define the goals. • Inventory all assets, liabilities, and

risks to income. • Identify distribution, tax, and estate issues. • Identify gaps or shortfalls.

A New Model, Sort of . . . continued

• Define the goals. • Inventory all assets, liabilities, and

risks to income. • Identify distribution, tax, and estate issues. • Identify gaps or shortfalls.

Page Header (Times 32pt)

• First line of copy (Arial 26pt) • Second line of copy

A New Model . . .

• Inventory fears. • Inventory strengths. • Inventory mistakes and lessons learned.

A New Model . . . continued

Client Meetings continued

• Meeting prep • Data gathering • Presentations

Rest and Digest Fight and Flight

Difference Between Positive and Negative

Art Aron

Agenda continued

• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client

You Have Options

• Interest only • Systematic withdrawal plan • Annuities and income riders • Hybrid strategies • Bucket approach

Bucket Approach

• Control of assets • Asset aggregation • Rebalancing tools and alerts

Bucket Approach continued

Step 1: Determine tax characteristic of accounts. • Qualified vs. nonqualified • For qualified assets:

– Some IRAs may have nondeductible money – Understand withdrawal rules (age 59½, age 70½) – May have to use 72(t) strategy

Bucket Approach continued

Step 1: Determine tax characteristic of accounts. continued

• For nonqualified assets – Ordinary income – Capital gain (short term vs. long term) – Interest (taxable and exempt) – MLPs (return of principle) – Annuities (exclusion ratio)

Bucket Approach continued

Step 2: Determine duration of each bucket. • Life expectancy • Risk tolerance • Simplicity

Bucket Approach continued

Step 3: Determine holdings in each bucket. • Cash and cash equivalents • CDs and bond ladders • Annuities • Mutual funds, equities, alternatives

Bucket Approach continued

Bucket Approach continued

Step 4: Create the paycheck. • From Bucket #1 • Transfer to a bank account • Bucket #1 replenished from Bucket #2 yield

Bucket Approach continued

Step 5: Monitor the plan. • Need to monitor each bucket • Move assets across buckets

– This can be automated, but asset movement still needs to be monitored.

• Take gains from growth buckets

Bucket Approach continued

Considerations • How many accounts for each client? • Trading costs incurred • Software tools • Staffing • Compensation

Agenda continued

• Setting up your practice • Meeting with a client • Implementing the plan • Following up with the client

Trust = Credibility + Reliability + Intimacy

Self-Interest

Unlock the Doors

The Psychological Benefits and Technical Hurdles of Retirement

Income Buckets

Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced

Planning Consultant

The further away you get from it, the more likely you’ll drown.

Your goal is your life raft.

The Goal

The Variables

The Process

Raise Awareness

Devil’s Advocate

Help Them Plan

Small Wins

Gradual Process

of the conversation? Are they leaning in or out . . .

• Body

• Voice

• Face

What Can You Use?

The Psychological Benefits and Technical Hurdles of Retirement

Income Buckets

Kol Birke, Financial Behavior Specialist David Juliano, Senior Advanced

Planning Consultant