YOUR RETIREMENT INCOME
BLUEPRINT
Daryl Diamond CLU CHFC CFP
Diamond Retirement Planning Ltd.
We’ll Cross That Bridge ... The Perception
We’ll Cross That Bridge ... The Reality
Why the opportunity is so great!
Consumers are …
1
2
Ineptly advised
3
Under serviced
Over charged
Improving any or all of these factors
will bring business and referrals
The Challenge for Advisors
 Dealing with the differences
 Acumen
 Processes
 Structure / team
TIME
# 1 Question
Prospects
/ ClientsClients
The
Numberfor1 HNW
Question
for HNW
"Do you have a written plan
forecasting income and expenses in
retirement, to ensure that you don't
run out of money?"
Can I Afford to Retire?
Yes you can, if ...
1. You have sufficient assets / benefits / income to
create the cash flow you need ...
2. In order to provide you with the lifestyle you want
3. And this can be sustained throughout your
retirement
The Need for A Blueprint
• A detailed Blueprint incorporates ...
 Processes
 Proven strategies
 A defined course of action
• So many moving parts and so many changes
• Variables quite often outnumber guarantees
• A plan provides a clear view and understanding
• Coordinates a number of household income streams
• Shows the impact of how improvements to their
current situation will benefit them
The Importance of The Blueprint
 Serves as a framework for a course of action
 Provides the context in which to illustrate and address an
investment strategy as well as health risk and wealth transfer
issues
 Allows clients to adapt more easily to change
 Shows that you actually know what you are doing
 Allows you to show the cumulative value and positive impact of
improvements
Improving areas of weakness
1
Find the area(s) of weakness within the client detail or
situation
2
Show clients the cost and/or disadvantage associated
with the weakness
3
Show clients options on how to improve the situation and,
if possible, quantify the benefits of taking action
4
Implement the solution to “make things better”
Better = More efficient
 Preserve government benefits
 Preserve tax credits
 Less tax on income and on estate
 Less cost for investments
 Put less strain on income-
producing assets to create the
income needed
 Enhance wealth transfer
opportunities for heirs and charity
 Use insurance vehicles for health
risk management and wealth
transfer
The Impact of the
Improvements is
Immediate
The formula
A number of
improvements X
A larger sum
of money
X
The number
of years in
retirement
=
A LARGE DOLLAR AMOUNT
The Income Continuum
Today
Future
Survivor
Estate
It is not solely a matter of INVESTING their assets.
It is also about how you help them USE their assets.
Step-By-Step Income Plan
1.
2.
3.
4.
5.
6.
7.
8.
Assessing current lifestage
Determine lifestyle and time objectives
Financial goals and priorities?
Create income needed through layering
Aligning Investments with the Blueprint
Assess impact on net worth
Health Risk Management
Wealth Transfer – Spouse / Estate / Intergenerational.
Step 1
Assessing Current Lifestage
 “Time-Driven” Stages
 “Event-Driven” Stages
Step 2 Define Client’s Lifestyle Objectives
 What
 Are
is the client's view of retirement?
they retiring or “transitioning”?
 What
role will work play in their plans?
 What
are their lifestyle and fulfilment goals?
 What
plans do they have for maintaining their physical and
mental well-being?
 How
do they view spending their time?
 What
are their family priorities?
 Where
will they reside?
Lifestyle Objectives
Step 3
Determine their financial priorities
•
Establish their Money Hub priorities
•
Initial income target
•
Additional cash flow in early years
•
Lump sum requirements
•
Income for insurance or critical illness premiums
•
Inflation considerations
•
Reduction in spending in later years
•
Is this sustainable?
•
Survivor issues
Survivor Income Issues
1. Are there reduced or discontinued income streams?
2. What is the timing of the above?
3. What percentage of total income does this represent?
4. What level of income does this leave for survivor?
5. Is this sufficient?
6. Are all assets currently being used for income?
7. What asset allocation changes will be likely?
8. What are the new beneficiary / estate arrangements?
Income Target
Needs
Discretionary
Income Trends Over the Retirement Years
Income needs, showing a reduction at younger spouse's age 75
to reflect slowing spending patterns as clients age.
Transition Math
 Percentage of pre-retirement income
 Sustainable lifestyle
Step 4 Layering Income
1.
2.
3.
Using the least flexible income sources as they are
available
Using least tax-efficient income sources in lower tax
brackets
Working efficiently within the tax brackets
Getting the next $1.00 after tax
Withdrawals required - MANITOBA Rates 2012
Bracket
10,823
Rate
Fully
Eligible Capital Non-eligible
taxable dividends gains
dividends
25.9%
$1.35
$1.00
$1.12
$1.15
28.0%
$1.39
$1.03
$1.16
$1.19
35.0%
$1.56
$1.09
$1.22
$1.33
43.4%
$1.76
$1.24
$1.28
$1.55
46.4%
$1.86
$1.31
$1.30 $1.64
31,000
42,709
85,415
132,407
Step 4 Layering Income
1.
2.
3.
4.
5.
6.
Using the least flexible income sources as they are
available
Using least tax-efficient income sources in lower tax
brackets
Working efficiently within the tax brackets
Putting the least amount of “strain” on an asset to
deliver the next dollar to spend
Looking for income-splitting opportunities
Determining which assets are best to use and which are
best to defer
“Layering” is ‘income planning’ in the most specific
sense.
It is the year-by-year determination of how to
create the income that you need, from the sources
available to you, in most efficient way.
Step 5 Aligning Investments With The Blueprint
The Balancing Act For Advisors
• Use assets but preserve assets
• Invest for income and for growth
• Balance short-term and long-term use of assets
• Address inflation but respect spending patterns
• Spend, but leave a legacy
Constantly adjust as clients progress through
retirement life stages
The 4 Investor Considerations
Certainty
Inflation
Probability
Taxation
Fees
Perpetuity
Flexibility
Retirement portfolios
1. Consolidate assets
2. Use a process that clients understand and can
“buy into” for the long term
3. Consider income streams as well as assets
4. Seek tax-efficiency in asset allocation
5. Be able to be selective
6. Seek lower volatility
7. Look for reasonable fee structure
What we cannot control
 Stock markets
 Interest rates
 Inflation
 Currency
 Advisor behavior
 Client behavior
"History teaches us that
investors behave wisely ...
once they have exhausted
all other alternatives.“
....Steve Leuthold
What we can control
 Asset allocation
 Which investments will create
income
 Rate of withdrawal from assets
 Navigating the tax brackets
 What we defer for tax
purposes
 Initial and ongoing investment
recommendations
 Investment costs (fees)
 Quality of advice we provide
Step 6 Assessing The Impact on Net
Worth
The Income Continuum
Today
Future
Survivor
Estate
It is not solely a matter of INVESTING their assets.
It is also about how you help them USE their assets.
The architect and contractor
 Create and implement
 You “put it all together” for them by taking things apart
 Helping people make best use of their time and their
money in retirement
1
Competent planning
2
Efficient execution
People are looking for advisors who can set up
retirement income streams and manage the process
... And they don’t know where to find them
The Six Step Plan
1.
2.
3.
4.
5.
6.
Assessing current lifestage
Determine lifestyle and time objectives
Financial goals and priorities?
Create income needed through layering
Aligning Investments with the Blueprint
Assess impact on net worth
The Most Common Question ...
 One time where you need specific advice
 This is complicated stuff
 Not a lot of financial advisors are doing this in a
comprehensive way
 Great opportunity for the financial business right
now
 Not prescriptive advice
 You need someone to help you do this efficiently
 I see a lot of mistakes being made
The Most Common Question ...
 A lot of the “rules of thumb” have a tremendous
number of exceptions
 In this particular case, a “good” advisor is worth
their weight in gold
 Knowledge and passion
 An integrated, holistic approach
 Stay away from ....
YOUR RETIREMENT INCOME
BLUEPRINT
Daryl Diamond CLU CHFC CFP
Diamond Retirement Planning Ltd.