Planning and Managing Retirement
Providing for retirement is the single most important long-term financial goal most of us will ever face. Because we are living longer, retirement can last 20-30 years. Due to the overwhelming complexity of retirement planning, the majority of people will turn to financial professionals as they approach retirement. With growing anxiety over the availability of Social Security and diminishing corporate-sponsored pension plan benefits, there is a pressing need to take charge and adequately prepare for your retirement.
Retirement income management services at KFM include planning, implementing and monitoring a retirement strategy that is reflective of your risk tolerance, values, and views of retirement.
To Enjoy Your Retirement, You Must Plan for It
For many individuals, everyday financial demands such as mortgage payments, tuition bills, or the expense of caring for an elderly parent can often overshadow good intentions of investing for retirement. In order to execute a successful retirement plan we must take into account ALL aspects of your life and incorporate those into our retirement plan.
Our Retirement Plans Begin with You
At KFM, the process of developing a sound retirement plan begins with three basic steps:
- Planning: gathering financial information, establishing spending and legacy goals, developing projections to determine the probability of sustaining income throughout retirement at desired levels.
- Implementing the plan by establishing a withdrawal strategy which fits your retirement lifestyle and needs.
- Monitoring to assess progress versus the plan. We provide clients with quarterly performance reports as well as annual reviews in order to assess the sustainability of the income plan. Plans which are not monitored can result in gaps between financial resources and spending.
In order to ensure optimal retirement management, we use computer models to forecast the future. Of course, no matter how good a model is, it cannot predict the future with 100% accuracy. There are too many unknown variables. One way to deal with unknown variables is to run plans using "what if scenarios". What-if scenarios are usually based on range estimates, and calculate as many scenarios as a planner can imagine, such as: What is the worst case? What if inflation is best case but expenses are worst case? What if inflation is average, expenses are average, but returns for the next year are flat? This form of analysis is extremely time consuming, and results in large amounts of data. But still doesn't give the probability of achieving different outcomes. With each retirement plan generated we use a method called Monte Carlo Simulation. Monte Carlo simulation is a method of simulating real-world situations involving elements of uncertainty. Values for uncertain variables are generated over and over to simulate the range of real-world possibilities. The results of the simulations produce the probability of achieving different outcomes. Based upon the results from the Monte Carlo simulation we then analyze how well a client's portfolio is positioned to weather the ups and downs of the market based upon a more realistic view of actual market results and how that impacts the probability of the plan's success.
The ability to generate and implement a successful retirement strategy is much easier when done using analytical tools mixed with personal knowledge of you and your unique situation.
