Withdrawal Models – Part 2

Our last post discussed the some of the types of Withdrawal Models available to assess the appropriate amount one should withdrawal from their income-producing assets. This post we discuss two more models to consider.

Duration-based Portfolios
This model is based on the concept of “bucketing” or “separate buckets”. This simply involves separating income-producing assets into 3 different “buckets”, which are intended to be used over short-, medium-, and long-term time horizons. Each bucket then has its own appropriate investment strategy.

  • Short-term needs: protection and guarantees
  • Intermediate needs: conservatively balanced investments
  • Long-term needs: growth-oriented investments

Income Allocation
This approach uses the combination of defined income streams, such as CPP, OAS, and pensions from employment, with guaranteed annuities, variable annuities, and withdrawals from variable investment portfolios. This provides a combination of certainty and flexibility. The refined version of this strategy as promoted by the Retirement Income Industry Association (RIIA) is to take a “Floor and Upside” approach. This involves creating a “floor” of guaranteed income that the client(s) cannot outlive to fund what are defined as cash flow needs. Once that is established, the balanced of the income-producing assets are invested to generate income for discretionary items and provide an opportunity for asset growth.

Get ahead in your retirement income planning and set yourself up for success.

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