A new focus, new thinking on income
Many financial professionals are focused on helping their clients grow their savings to be ready for retirement — and rightly so. But while formulating an asset allocation strategy is essential, so is focusing on income allocation once they hit retirement. After all, your clients must plan for how they’ll spend their retirement savings.
The LoMo (Longevity of Money) workshop addresses this often-overlooked aspect of retirement planning. By drawing on extensive research, the workshop provides you with some of the tools you may need to talk to your clients about their income strategy.
Understanding the four Ls
The foundation of the LoMo workshop is built around research by economist and academic Dr. Wade Pfau. We sifted through hundreds of pages of his findings and distilled them to give you a simplified way to talk about retirement income. Specifically, Dr. Pfau has broken down retirement goals into the “four Ls.” They are:
- Longevity: Having money that can’t be outlived, no matter how long the retirement
- Lifestyle: The ability to spend money in retirement without having to make drastic cuts
- Liquidity: Having reserves for the unexpected – that aren’t earmarked for other expenses
- Legacy: Leaving money behind to loved ones
By understanding these four pillars, you can engage with your clients as they start thinking about retirement income and preparing for the potential challenges to the four Ls, including longevity risk, market risk, inflation risk, and other road bumps. The process of building a retirement income strategy involves determining how to best combine retirement income tactics. Tools have been created to help optimize the balance between meeting various retirement goals and effectively protecting those goals from retirement risk. Ultimately these are conversations that once solved for, can lead to more retirement confidence.
Two schools of thought
There are two approaches to retirement spending: probability-based thinking and safety-first thinking. Knowing which bucket your clients are in can help you steer the conversation in a productive direction. The LoMo workshop includes a 10-question visual quiz for your clients to take. The output from the quiz can help determine your client’s “income style” for retirement which will act as baseline for future income planning.
Get started with the LoMo workshop
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