What Ladders and Buckets have to do with retirement income

I grew up on Signal Mountain in Chattanooga, Tennessee, where I attended an all-girls private school for grades 7-12. Some people think this sounds crazy, but it was a wonderful environment that allowed me to thrive in my studies.  This set me up for success to choose the right college, The University of Georgia (maybe that’s really why Fran hired me in 2007), to get my degree in Banking and Finance! For the past 7 years, I have gotten so much out of working with annuity products and helping our agents design practical retirement income plans so their clients can sleep well at night knowing that they will not run out of money in their retirement years.

One of my favorite retirement income planning concepts is utilizing a few different annuities with different insurance carriers and “laddering” buckets of money to generate lifetime income for a client.  Tarkenton Financial actually has proprietary software called Compass (www.CompassFinancialTools.com) that we can use to generate these plans.  This idea allows a client to defer a portion of his/her money and take advantage of the strong lifetime income rider roll-up rates while receiving an income stream from the first bucket of money.  Not only is this a great way to generate lifetime income for a client, but it can also help your client hedge against inflation.  If your clients are concerned about inflation, you can design this type of plan so each bucket of money can generate an income higher than the previous bucket.  For illustrative purposes, here is a sample case:

Mr. John Smith is 60 years old and has $500,000 that he wishes to allocate to annuity products.  He wants to begin a lifetime stream of income with inflation protection immediately.  Here is how we could structure his plan:

Income Plan for John Smith

 

Bucket 1

Bucket 2

Bucket 3

Total

Initial Premium

$88,900

$200,000

$211,100

$500,000

 

Annual Income Generated

Years 1-5

$18,000

$0

$0

$18,000

Years 6-10

$0

$20,000

$0

$20,000

Years 11+

$0

$6,325

$16,888

$23,213

 

While this is an incredibly effective retirement planning concept, there are many other planning strategies that we utilize on a daily basis.  Give us a call any time!  We’d love to help you put together an effective retirement income plan for your client!

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