section 1 - The American College Online Learning Center

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3. Understanding systematic withdrawalsa. Many surveyed advisors adjust the amount of the systematic withdrawal on anon-going basis using various dynamic withdrawal strategies.b. The most common adjustments include adjusting(1) For inflation(2) In order to match the initial withdrawal percentage (resetting)(3) As a result of simulation analysis(4) As a result of expected stock market valuationc. Usage of the dynamic withdrawal strategies according to the FPA Research CenterUse of Dynamic Withdrawal StrategiesYes, I may recommend adjustments to the withdrawal amount initiallyrecommended, but not based on the application of any specific policies.Yes, I may recommend adjustments to the withdrawal amount initiallyrecommended based on the application of dynamic withdrawal policies.No, I typically maintain the withdrawal amount initially recommended, except forinflation adjustments.35.3%29.5%18.8%No, I typically maintain the withdrawal amount initially recommended. 11.2%Not sure/ I don’t know 5.2%d. Adjustments according to the FPA Research CenterAdjustments Typically Made by Advisors who Use Dynamic WithdrawalOPTIONSPERCENTAdjust the recommended withdrawal amount so that it keeps pace with inflation. 35.6%Adjust the recommended withdrawal amount if the current withdrawal ratepercentage varies too much from the initial withdrawal rate percentage.Adjust the recommended withdrawal amount based on the current results of aMonte Carlo or other simulation analysis.Adjust the recommended withdrawal amount based on current and expected stockmarket valuation levels.Adjust the recommended withdrawal amount so that it maintains the initialwithdrawal rate percentage.34.5%34.5%33.2%18.4%Other* 12.3%*Other responses most commonly include adjusting based on client need/goals, changes in clientsituation, and various market shifts.e. Surveyed advisors believed systematic withdrawals are more effective thantime-based segmentation (also known as the bucket approach) and theessential-versus-discretionary income approach (also known as flooring).4. Approach versus producta. The FPA research indicates that the overwhelming majority of surveyed advisors(over 78 percent) first select an approach, and then select and manage theproducts needed to implement the approach (rather than using a product withan embedded strategy).6.7
5. Products used by surveyed advisors:Survey of Products UsedPlease select any of the following financial products you use/recommend with your clients for retirement incomegeneration.OPTIONSPERCENTBond funds 78.8%Equity mutual funds 75.5%Bonds 69.4%Dividend-paying stocks 66.2%Exchange-traded funds (ETFs) 54.6%Real estate investment trusts (REITs) 49.7%Treasuries/TIPs 47.9%Variable annuities with guaranteed living benefits (GMIBs, GMABs, GMWBs) 46.2%CDs 44.2%Immediate annuities 39.5%Combination products (e.g., life insurance and long-term care) 28.1%Separately managed accounts (SMAs) 26.2%Fixed deferred annuities 26.2%Reverse mortgages 16.8%Limited partnerships 12.6%Target maturity funds 11.6%Long-term care annuities 10.4%Guaranteed payout funds 6.2%Other variable annuities 5.5%Managed payout funds (income replacement funds) 3.2%Other (please specify) 3.0%Advanced life deferred annuities (ALDA) 2.9%None 2.7%SECTION 2: THE SYSTEMATIC WITHDRAWAL APPROACHLO 6-2-1: Analyze the systematic withdrawal approach to retirementincome planning1. The most popular approach to turning retirement assets into retirement income is thesystematic withdrawal strategy.2. The systematic withdrawal strategy allows a client to methodically draw down from theirportfolio to create a steady cash flow for retirement.a. The amount of the portfolio that can be withdrawn each year to create incomedepends upon several factors.6.8
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Huebner School SeriesHS 353 STUDY O
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THEAMERICANCOLLEGE.EDUThrough The A
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c. But it is more comprehensive bec
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(3) Work part-time during retiremen
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SECTION 2: UNDERSTANDING RETIREMENT
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d. Solutions(1) The model considers
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. Other sources of retirement incom
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c. Another option for solving cash
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(b) Net worth statements that ident
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d. Be ready to reengage with the cl
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(b) In financial planning(c) In inv
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j. Planning Point: Planners can use
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e. We also need them to have a bett
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Assignment 2IDENTIFY RETIREMENT INC
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(2) Income4. Determining risk toler
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collaborative experience which focu
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6. Asset allocation and risk tolera
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c. How long will the income last?d.
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. Durationc. Reliabilityd. Other6.
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c. Supplemental Security Income (SS
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. An unused emergency fund can supp
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5. Inflation(2) The expense method
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Assignment 3CHOOSE APPROPRIATE STRA
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. Save as a percentage of income an
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(1) Note that 38% of second income
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(4) The AARP website has a national
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4. Contributions to IRAs and Roth I
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carve out the nondeductible contrib
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(2) Plus salary deferrals (for an i
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a. Example:(1) Save $10,000 in 25%
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(a) This requires knowing four fact
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. Solution(1) Li and Lin Lin are bo
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(1) The increase in dollar amounts
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9. In some circumstances, an indivi
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2. Reverse mortgage basicsa. Almost
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5. Planning considerations(b) Keep
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(2) Some funds that are promoted as
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(1) Berstresser, Chalmers, and Tufa
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RESOURCES FOR COMPETENCY 3: CHOOSE
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(2) From the previous employer(s) p
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8. IRA funded plans (IRAs, SEPs, SI
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. Does the distribution election fi
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6. Net unrealized appreciation rule
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a. Tax-exempt plans include Roth IR
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8. Calculating required distributio
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(2) Exception: If there are separat
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5. Impactc. Tax rates are low in ea
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(7) Based on ordering rules, identi
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7. A married couple who file jointl
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(1) Needed to provide the appropria
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13. Transfers at deatha. Wills(2) A
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(1) The Retirement Equity Act manda
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(2) Beneficiary designation of bene
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13. Overview14. Types(2) The donor
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(1) Charity needs only to payout in
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c. Access should be granted to an a
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nightmare of living probate might h
Page 122 and 123: (6) Powers to represent their princ
Page 124 and 125: c. If the policy is term coverage w
Page 126 and 127: e. Factoring personal and family he
Page 128 and 129: problem. On the other hand, we can
Page 130 and 131: d. Adding a cost of living adjustme
Page 132 and 133: g. Planning Point: Sometimes a high
Page 134 and 135: (2) Clients may not be able to “a
Page 136 and 137: c. Ensure that the client is receiv
Page 138 and 139: a. Example: Because of physical and
Page 140 and 141: options about where to get his/her
Page 142 and 143: (2) Facilities, monthly fees, and s
Page 144 and 145: 8. Other strategies that help to co
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Page 148 and 149: a collapse in the real estate marke
Page 150 and 151: a. In a later competency we will di
Page 152 and 153: years of service with the employer)
Page 154 and 155: a. Planning Point: Planners should
Page 156 and 157: (2) If you have locked in food, ren
Page 158 and 159: (4) Loss-of-spouse risk—Deferred
Page 160 and 161: (1) Excess withdrawal risk—The us
Page 162 and 163: (5) Frailty risk—Managing assets
Page 164 and 165: 7. Practice good career management:
Page 166 and 167: Assignment 6CHOOSE APPROPRIATE STRA
Page 168 and 169: c. Example: Chuck and Sarah divide
Page 170 and 171: e. The bucket approach can be thoug
Page 174 and 175: (1) The time horizon used in the ca
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Page 178 and 179: markets have declined by a specifie
Page 180 and 181: (2) Annuities and long-term care an
Page 182 and 183: anticipates ramping down her activi
Page 184 and 185: c. Each of the three portfolios wil
Page 186 and 187: SECTION 4: THE ESSENTIAL VERSUS DIS
Page 188 and 189: d. Clients give up investment contr
Page 190 and 191: geared toward long-term growth. Thi
Page 192 and 193: . Trade-offs involve:(1) Irrevocabl
Page 194 and 195: (1) Rate at which banks lend to the
Page 196 and 197: . Dollar-denominated liabilities of
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Page 200 and 201: 4. Taxationtheir return generating
Page 202 and 203: . Close ended(1) IPO style launch(2
Page 204 and 205: (3) Tax control17. Conversations in
Page 206 and 207: (3) Mutual funds provide lower cost
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Page 212 and 213: 6. Today’s annuitization rates ar
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(1) A problem is that if the client
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(b) A traditional fund company(c) A
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d. Evelyn is in great health and he
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RESOURCES FOR COMPETENCY 7: INTEGRA
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