The key concern for investors facing retirement is whether they can sustain their desired life-style through retirement without running out of money. Investing for retirement income however, is a daunting challenge that confounds balancing key competing needs:
Some advocate a focus on total return rather than income for retirement portfolios. This works well during the accumulation phase, however, when approaching retirement the objective shifts to converting your assets into a reliable income stream. 'One-size-fits-all' solutions centered on total return prove inadequate because every retiree has unique retirement goals, unique income needs, and unique personal circumstances.
To address this complexity, we build personalized retirement income portfolios that are intuitive, simple to understand, and most importantly are flexible enough to allow for course-correction along the way. Our approach creates a retirement experience that provides stability, peace of mind, and flexibility for our clients.
Key attributes of our approach:
We ascribe to the 'safety-first-philosophy' in planning for retirement. We implement this philosophy using the time-segmentation strategy (also known as Bucketing). The basic premise of this strategy is to invest today in such a way as to ensure that future liabilities (retirement expenses) will be covered when they come due.
We segment retirement assets based on the risk level appropriate for each bucket, the type of client expenses to be covered (essential or discretionary), and the target date when the required income should be available.
We build an income floor at the front-end of retirement to meet up-coming essential spending goals within the next 1-3 years, with growth achieved through successively riskier allocations to equity and alternative investments for the rest of portfolio buckets 2 - 5, through retirement.
Step 1: ORGANIZE
A big impediment to retirement income planning may be simply getting started. There is much to think about - What are your income sources? How much income do you need? When should you take Social Security? The list goes on. We help you answer these questions and gather the necessary information to build a resilient retirement income portfolio to last through retirement.
Building a retirement income plan for the future requires a thorough understanding of your current situation. We review quantitative data, such as current financial statements to establish current income and spending habits. Looking at your current situation provides insight about future spending patterns.
Our review also includes qualitative fact-finding to help reveal non-quantifiable information about your current financial challenges and retirement concerns. This initial evaluation establishes a context to determine whether your articulated retirement goals seem realistic based on your current resources and spending patterns.
Some clients may know what their lives will look like in retirement, but others may not. We work with you to identify both expressed and unexpressed goals and objectives. Then help you prioritize your personal lifestyle goals and set realistic expectations about how you may achieve them financially or agree on trade-offs that you find comfortable.
We estimate the income needs required to support your retirement objectives. Combined with information about current expenses we project future retirement expenses. We categorize expenses into essential or discretionary because discretionary expenses provide a degree of flexibility in the event that you have an income gap to close.
Together, we will use the information from the above analysis to set achievable income needs during retirement.
Step 2: FORMALIZE
We take an inventory of all your current and potential sources of income . These may include retirement plan savings, pensions, rental income, and Social Security. Similar to identifying income sources, we list all those assets available to generate retirement income including less obvious sources such as cash value life insurance, home equity and collectibles.
We conduct a preliminary analysis of whether current income sources and income generated from available assets will be sufficient to meet your estimated need through retirement. Your retirement preparedness may take any of the following funded statuses:
Based on your preliminary funded status, we proceed to develop appropriate strategies to address the income gap.
If the preliminary analysis suggests you are not financially prepared to meet your retirement income objectives, the focus turns to identifying strategies to eliminate the shortfall. This may mean saving more, getting better performance out of your retirement portfolio, delaying retirement, or working part-time in retirement. It can also mean deciding to live on less. Clearly, there are trade-offs in addressing these concerns and you may have to make some difficult choices. We work with you to strike a comfortable compromise.
As we formulate strategies for addressing the shortfall and converting assets into income, we also stress test the plan. Our recommendations will address the various risks and contingencies that you may face in retirement and how to mitigate them.
The deliverable from this step is your Retirement Policy Statement (RPS) that articulates:
Step 3: IMPLEMENT
With the above analysis completed, we turn to converting your financial assets into income by building your retirement portfolio using the time-segmentation approach.
We build an income floor at the front-end of retirement to meet up-coming essential spending goals within the next 1-3 years, with growth achieved through successively riskier allocations to equity investments and alternative assets for the rest of portfolio buckets 2 - 5, through retirement.
The size, structure, and asset allocation within each bucket is based on various factors including:
Step 4: MONITOR
Life is constantly evolving, so will your income needs and retirement goals. Moreover, it is unlikely that the spending and portfolio return projections incorporated in your plan will be exactly as we estimated. The good news is your retirement income plan is designed to be flexible enough to change right along with your circumstances. We will monitor your retirement income plan to address your changing needs and make any necessary adjustments along the way.
We will meet periodically to review the progress of your plan and make any necessary adjustments. Each time we meet, you will receive a Client Review Report that details and measures your plan’s progress and articulates specific changes that are needed to keep you on track.
Our time-segmentation strategy utilizes a variety of products to address specific client needs and circumstances, including:
We build, manage, and track your customized income portfolio that is designed to deliver a structured yet dynamic 'personalized pension' through retirement.
Key client benefits:
The figure above depicts 5 different buckets, with transfers between buckets carefully structured. Bucket 1 contains enough cash and liquid assets to fund several initial years of retirement, with buckets 2-5 containing successively riskier assets to generate income and growth in concert with target dates when assets from each bucket will be needed.
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9375 East Shea Boulevard, Scottsdale, Arizona 85260, United States
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Cognis Retirement Group® (“CRG®”) is a State Registered Investment adviser (RIA), pursuant to the Investment Advisers Act of 1940, as amended, with principal offices in Scottsdale AZ, and branch offices in Greenwood Village CO and Orlando FL.
CRG® and its representatives are in compliance with the current filing requirements placed upon registered investment advisers by those states in which CRG® maintains clients. Copies of CRG’S current written disclosure brochure (Form ADV-Part 2A) and client relationship summary (Form CRS) discussing CRG’s business operations, services, fees, and client relationships are available from Cognis Retirement Group® upon request or may be downloaded from this site under our Legal Disclosures.
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