Income for Life: Strategies to Avoid Running Out of Money in Retirement – ThinkAdvisor | Jewelry Dukan

In the case of an advisor using liability-driven investments to meet an individual client’s retirement income needs, the advisor would review his client’s future liabilities and develop an investment strategy to meet those future liabilities.

The liability-driven investment benchmark model, explained

That liability-driven investment benchmark model essentially generates a benchmark for the portfolio based on economic scenarios, forecasts and optimization of the investment strategy used. Based on these assumptions and the associated liabilities, this can provide the financial advisor with a benchmark target for future data.


Tontines are a form of pooled savings plan that is similar in some respects to an annuity. They have not been used in the US since the early 20th century, but there has been talk of reviving them in the US

Moshe Milevsky, a finance professor at York University in Toronto and a consultant to financial industry companies, is working with a firm to offer a 21st-century tontine.

What is a tontine?

A tontine is a long-term income solution whereby a group of individuals pay into a common fund. Once people retire, the fund will start paying them an old-age pension. If fund participants die, payouts adjust to the number of remaining beneficiaries in the fund.

Are tontines legal?

Tontine insurance – a related but different product – was outlawed in New York State in the early 1900s following an investigation into the abuses associated with the policies. As regulation became more restrictive, insurance companies decided to stop using tontines.

In a recent interview with ThinkAdvisor, Milevsky emphasized that his modern tontine would be very different from the old tontines. It’s structured as “a garden variety mutual fund that you can buy but never leave,” he said. “You will receive payments for the rest of your life”

Outcome Defined (Buffer) ETFs

Defined earnings or buffer ETFs Allow clients to participate in a specific market upside level while providing some downside risk.

What is a buffer ETF?

Buffer ETFs can be very complex products, but essentially they invest in a broad market index like the S&P 500. There’s also an option collar to limit downside risk. This loss protection typically lasts for one year and loss protection limits are generally between 9% and 30%. Fund Shareholders would only be exposed to losses in excess of these limits.

Advantages of a buffer ETF

The main benefit of a buffer ETF is its downside risk limits. This can help clients nearing or retiring to offset the potential impact of a market downturn in the early years of retirement, while also having the potential to participate in a percentage of the upside of the underlying benchmark. The other benefit is that the ETF format allows for greater liquidity than bonds or other income-related vehicles.

Reverse Mortgages

A reverse mortgage allows a homeowner to borrow against the equity in their home. A reverse mortgage can, in some cases, be part of a client’s overall retirement income strategy.

How does a reverse mortgage work?

Homeowners who are at least 62 years old can borrow against the value of their home and receive payments in a lump sum, monthly, or as a line of credit they can tap into. No loan payments are required from the borrower; The loan becomes due and payable when the homeowner dies or moves out of the home. The federal government requires homeowners considering a reverse mortgage to attend educational events prior to taking out the loan.

What is the disadvantage of a reverse mortgage?

There are several disadvantages of a reverse mortgage. This may include the costs and fees associated with the loan. This may not be the best option for the client if they are about to move house or wish to leave their residence to their heirs as part of their estate. It is important that you ensure that your customers are not victims of reverse mortgage scams.

While no payments are required with a reverse mortgage, there are rules that must be followed. Violating these rules may result in consequences, including foreclosure.

What happens when a reverse mortgage holder dies?

Upon the death of the homeowner, the heirs receive a due and due notice from the lender. You have the option of buying or selling the house to pay off the debt. You can also hand over the house to the lender.

Benefits of a Reverse Mortgage

A reverse mortgage can be a means for older adults who have a large portion of their net worth tied up in their home’s equity to generate extra cash for retirement.

In what situation is a reverse mortgage a good idea?

A reverse mortgage can be a good solution for clients who have a lot of equity in their home and want to continue living there. A reverse mortgage can be a great way to generate the extra money you may need to meet your income needs in retirement. A reverse mortgage also works in situations where there are no heirs or where the homeowner is not interested in bequeathing the home to their heirs.

Inflation-linked pensions

An inflation-linked annuity guarantees a real rate of return that is at or above the rate of inflation.

What is an inflation-linked annuity?

An inflation-linked annuity provides annuity payments that are linked to the level of inflation. These are instant annuities, with payments typically starting within a year. There may be caps on the inflation benefit and the terms of any contract under consideration must be reviewed before proceeding.

What are the advantages?

The main benefit of an inflation-linked annuity is that payments will keep pace with inflation over time, at least to the extent of any payment caps. Inflation is a major enemy of retirees, who largely live on a fixed income.

Qualified longevity annuity contracts

A Qualified Longevity Annuity Agreement or QLAC can help retirees preserve some of their retirement account balances for the latter part of their retirement. They can also help defer RMDs to this portion of their retirement account balance.

What is a QLAC?

A QLAC is a deferred annuity earned under a qualifying retirement plan such as a 401(k) or within an IRA. Up to 25% of the lessor’s account value, up to a maximum of $145,000, can be used to purchase a QLAC and the annuity benefit can be deferred until age 85.

Benefits of a QLAC for providing retirement income

The benefits of a QLAC for your customers can be twofold. First, the deferred annuity reserve the amount of the annuity for the latter part of your customer’s annuity. This money is protected from the effects of market downturns and excessive spending by account holders.

The second benefit is that the amount in the QLAC is exempt from RMDs until annuitization begins. This can save your customer taxes over time.

One possible downside to a QLAC is that as a fixed annuity, benefits don’t keep pace with inflation. This can be a problem in times of rising prices like we are currently experiencing.

Work longer

Many people of normal retirement age work longer hours voluntarily or out of necessity. Working longer can have some benefits for those nearing or past retirement age.

How does working longer affect retirement provision?

Working longer hours can impact your clients’ retirement savings and income planning in a number of ways.

  • Working longer can allow your clients to continue paying into their 401(k) or other retirement accounts and defer those accounts to fund their retirement needs.
  • Working longer can have a positive impact on your client’s Social Security benefits, as their income ranks among the top 35 years of their career.
  • Those working at age 72 can defer their RMDs on their employer’s 401(k) plan if the employer has made the correct choices in their plan documents. This keeps the money in the plan growing and saves taxes that would have been due on the RMDs. This exemption applies to this plan only, and RMDs must begin as soon as the employee leaves the workplace.

When does it make sense to continue working instead of retiring?

There are a number of reasons why your client may choose to continue working rather than retire. Part of the reason is that they enjoy their jobs and feel like they might get bored in retirement without some sort of daily routine to stimulate their mind.

Certainly the necessity of needing the money to do the work is a valid reason. It could be that the combination of working a few extra years, deferring their Social Security benefits, and increasing their 401(k) is the combination needed to ensure they don’t run out of money in retirement.

Roger Wohlner is a financial writer with over 20 years of industry experience as a financial advisor.

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