R.O.I.'s Retirment Planning

3 PRIMARY RETIREMENT PLANNING CONCERNS

Ø Outliving Income;

Ø Retirement income does not keep up with reality (i.e., the never ending effects of inflation and taxes); and,

Ø Dealing with life’s contingencies (e.g., changing circumstances, emergencies, long-term care scenarios, etc.).

Question: Which of the above concerns is the most important one?

Answer: The one that a client is currently facing.

Solution: Ideally, a plan should provide a high likelihood of success for all 3 concerns without sacrificing one or more concern(s): A plan that -

1. Provides reliable income, but at a reduced life style or subsistence

level, is acceptable only to sustain life;

2. Provides a comfortable life style for a while but knowingly later

requires dependency upon working, family and/or society, is unwise;

3. Provides reliable income and comfortable life style but cannot adjust to

contingencies, i.e., real life, is dangerous;

4. A plan that provides a high likelihood of reliable income, comfortable life

style, and ability to adjust to contingencies, is ideal.

R.O.I.’S RETIREMENT PLANNING STRATEGY

First Step: Relative to a client’s R.O.I. managed portfolio, determine the actual projected dollar withdrawals (not a % of portfolio) from each account by either:

1. Creating a Comprehensive Financial Plan (CFP) that will accurately

project future withdrawals after accounting for inflation, taxes, et. al; or,

2. The Client committing to specific future dollar withdrawals (some

projections may be needed to determine viability of withdrawals).

Second Step: Make sure client has an emergency fund (minimum = 3 months of budget), open home equity line, and a 72 hour kit;

Third Step: Divide client’s account(s) that are subject to planned withdrawals over the current four years into Short-Term (S-T) and Long-Term (L-T) accounts, and then administer them as follows:

1. Make sure client has in possession the current year’s projected

withdrawal;

2. Manage the Short-Term account to assure up to 3 more years of future

projected withdrawals (note that 1 and 2 protect the L-T account against

up to 4 consecutive down years – something that has never happened in the markets);

3. Manage the Long-Term account to help beat the never ending effects of

inflation and taxes (because the S-T account is so conservative,

probably increase the L-T account allocation model one level, e.g.,

Moderate to Aggressive);

4. Have an Annual Review with client to see how life, economies,

laws, and circumstances have changed, and make relative plan changes;

and,

5. Both the S-T and the L-T accounts are very liquid and very diversified to

deal with contingencies.

Client’s

Annual

Review

Client’s

Possession

Short-Term

Account

Long-Term

Account

Current year.

Current yr’s w/drawl.

Use a 3 yr allocation & fully fund 3 years’ of w/drawls from L-T account.

Balance of

portfolio.

1 year hence.

Current yr’s w/drawl

from S-T account.

(1) If markets were up, use 3 yr allocation & fully fund 3 years’ w/drawls from L-T account;

(2) If markets were down, use 2 yr allocation & thus fund 2 years’ w/drawls.

Balance of

Portfolio.

2 years hence.

Current yr’s w/drawl

from S-T account.

(1) If markets were up, use 3 yr allocation & fully fund 3 years’ w/drawls from L-T account;

(2) If markets were down, 100% in cash & thus fund 1 year’s w/drawls.

Balance of

portfolio.

3 years hence.

Current yr’s w/drawl

from S-T account.

(1) If markets were up, use 3 yr allocation & fully fund 3 years w/drawls from L-T account;

(2) If markets were down, client “tightens belt” & fund 1 year’s w/drawls from L-T account.

Balance of

portfolio.