A Goal-Based Approach to Retirement Income Planning

While a traditional retirement income plan focuses on deriving income from an investment account, a goal-based retirement income plan focuses instead on a desired lifestyle. This presentation introduces a simple process to help a client and their advisor develop a deeper understanding of their retirement spending and legacy goals. Rather than seeing risk tolerance as annual portfolio volatility, a goal-based approach emphasizes the role of lifestyle volatility when assessing a retiree’s appropriate investment risk. The relationship between lifestyle and investment risk is illustrated through retirement simulations to gain a better understanding of the pros and cons of asset allocation choices. An unknown lifespan presents an additional challenge that can be addressed either by spending conservatively or by pooling longevity risk with other retirees through annuities.

Learning Objectives:

1. Introduce a goal-based process that can be used to develop a customized retirement income plan
2. Understand the lifestyle tradeoffs of investment and longevity risk
3. Discuss additional challenges that can be addressed either by spending conservatively or by pooling longevity risk with other retirees

This session is sponsored by Lincoln Financial.