Comparing Retirement Plans at a Glance

How can we tell if a retirement plan will be successful or more importantly, if one retirement plan is better than another?

Too often the method of measuring the potential success of a retirement strategy is overly simplified by using average market returns or the antiquated four percent rule of withdrawals. This inevitably leaves out black swan events like we experienced in 2008 and 2001. Or, even if the advisor believes they are addressing sequence of return risk by considering Monte Carlo simulations, the plan’s success is represented by only one percentage. This misses the perspective of what is happening at the other 99 percentages. JourneyGuide provides a unique comparison view by looking across all market conditions at the same time.

Let’s consider an example. Suppose a couple has a goal of spending $100,000 in retirement but after performing an analysis the client has a 72% likelihood of meeting that goal. We saw in the first session, Know Your Retirement Numbers, that JourneyGuide instead translates this analysis into something the client understands, a lifestyle discussion about how much they can spend rather than percentages. In this case, the client can safely spend $87,000 in retirement.

Suppose the advisor suggests a change to the plan by shifting assets into a guaranteed income stream using an income annuity. A common question is how do we compare the opportunity cost of that reallocation? JourneyGuide provides a side-by-side graphical analysis by comparing the two plans across 5000 simulations of market conditions. In the example above, the client would be better off in very poor markets and the opportunity cost is minimal in average and favorable markets. Specifically, JourneyGuide’s Income vs. Risk graph displays the crossover of when one plan outperforms another, and by how much. So, the advisor and the client are armed with objective, quantitative information to go along with the more qualitative discussion points.

To experience JourneyGuide for yourself, visit www.journeyguideplanning.com to request a demo or start your free trial today.

Michael L. Smith is a co–contributor to this press release.