Managing Retirement Income Cash Flows at JBA

By John Berzellini

When deciding how to take income from their portfolios, persons in or nearing retirement are faced with an increasing variety of investment strategies, insurance products, and asset allocation plans designed to meet income needs during retirement. It seems as though we are at a point where the proliferation of investment strategies and financial products is creating more confusion than solutions.

Implementing understandable time tested investment strategies and effectively managing retirement cash flows are core services offered by JBA Financial Advisors.

When taking income from portfolios, there are two basic techniques: living off interest and dividends; or living off interest and dividends and a portion of principal. The later must be done in a way that does not put the retiree in danger of outliving principal.  Of course, specific strategies depends on each clients facts and circumstances, and whether or not he or she wishes to leave bequests to heirs or charitable organizations.

The methods of taking income from a portfolio can be summarized as follows:

  • Taking withdrawals as needed
  • Living off interest and dividends
  • Taking a fixed dollar amount
  • Taking a fixed dollar amount and adjusting for inflation
  • Withdrawing a constant percentage of the portfolio
  • Taking IRS minimum distributions
  • Varying withdrawals based on the portfolios performance
  • Using a portion of portfolio assets to purchase an immediate annuity

The above methods are not mutually exclusive; therefore, can be used in combinations by creating investment pools for specific goals.

At JBA, the process begins with an overall assessment of the client’s financial situation.

Retirement goals are separated into three categories:  1) Needs (living expenses), 2) Wants (example, country club memberships) and 3) Wishes (example, charitable bequests); using three analytical measures, we test the probability of funding all retirement goals , and will analyze various social security benefit claiming options effect on retirement cash flows.

Depending on the results of our analysis; we may recommend changes to asset allocations, modification to the wants and wishes, additional savings programs, or changes to retirement date. When our stress tests indicate that goal attainment in an acceptable probability range; we will custom design retirement income programs to fund retirement goals.

Since JBA offers a comprehensive retirement planning service, on an ongoing basis, we will manage retirement income cash flows making disbursements as directed, provide investment advice, and consider income tax planning strategies and estate planning needs.

Thru our relationship with Shareholders Service Group and the Bank of New York we make available a number of cash management services including checking account and credit card services.