What philosophy guides your clients’ retirement income planning? In today’s episode of Carson Group and PIMCO‘s Retirement Income Series, Christine Benz, Morningstar’s Director of Personal Finance, explains the key strategies in retirement income planning and how advisors can educate their clients about the different approaches.

A highly respected expert in the retirement income space, Christine is the author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success. She traces her interest in the field to her father-in-law’s income-centric approach to investing at the expense of a diversified portfolio.

“I thought, what can we do to simplify this for people so they can build a diversified portfolio that delivers the cash flow they need to live on in retirement and they are not disproportionately anchoring on current income?” she said.

The more Christine learned about retirement income, the more she realized the importance of advisors educating clients about the different strategies available to them.

In today’s episode, Christine speaks with Jamie and Devin Ekberg, Senior Consultant and Education Advisor with PIMCO, about three key approaches to retirement income planning: the bucket strategy, flooring and the 4% guideline. She breaks down the pros and cons of each strategy and how they can be combined. Christine also shares her insights on how to structure a portfolio, the role “junk bonds” can play, the challenges of retirement income planning at the current high interest rate, the high inflation environment and more.

Key Takeaways

  • It’s a mistake to build a portfolio that works in theory but doesn’t meet the emotional needs of your client. It has to be constructed in a way that your actual client can live with.
  • It’s up to advisors to explain to clients why they’ve structured a portfolio in a specific way. Using the concept of time horizon to organize a portfolio is a good way to help clients understand investment decisions.
  • High interest rates and inflation demonstrate why it’s critical to structure a portfolio so investors never have to tap cash flow sources when they are in a trough.

Quote

“Accumulation is a walk in the park compared to decumulation. If you invest regularly and diversify in accordance with your time horizon, you’re probably going to be OK. But there are all kinds of crazy things people can do when it comes to generating cash flow from their portfolios. ” – Christine Benz 

Links

Carson Group is committed to advancing financial literacy. Schedule a consultation to learn how Carson can help you help your clients and grow your business. Visit PIMCO to learn more about the work it is doing in the retirement income planning space.

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