What's your retirement income plan?

I have a friend who is a husband, father, business professional and an avid cyclist. Any guesses as to the number of bikes this adult owns? Eight. He owns eight bikes.

When I asked him why so many bikes, he responded with a long answer about each bike’s purpose within his arsenal. One is his competition road bike, another is his training road bike, over there is his snow bike…and on and on. He has a bike for many occasions because conditions change often, thus requiring different tools for different needs.

Recently I have noticed an alarming trend in our industry. The move toward a heightened awareness of income planning has brought more advisors to the income planning table. When surveyed, advisors have overwhelmingly stated that they have a preferred method they use for income planning. They use either systematic withdrawals (sometimes called the safe withdrawal rate method) or essential versus discretionary (flooring) or bucketing (age-banded).  Rarely does an advisor state that he or she uses all three.

This is the equivalent of saying: “Yes, I have a bike and I’m really a good rider.”

I might suggest that pros have many tools at their disposal, all of which they are proficient with. We should all be moving toward being cyclists with eight bikes. We should be cautious of relying on any single strategy to solve such a highly complex challenge as retirement income planning. The risks are too great and the cost of error for the client is simply too high.

How do you plan for your clients’ income? It depends.