What Is It?
The Retirement Machine is a distribution portfolio management tool. It is built on a cloud-based distribution platform. The tool is based on a time segmented, structured harvesting strategy. Distributions are taken from a Distribution fund for all cash flow needs during the defined time segments. Unlike traditional tools available in the industry, The Retirement Machine does not just analyze a proposed allocation. It will create an allocation…one that supports the solution.
How Does It Help?
Instead of making investment choices based on overly simplistic projections or heat of the moment decision, The Retirement Machine produces a recommendation that’s custom tailored and unique for each situation. Unlike a risk-based asset allocation, ultimately governed by emotional needs, The Retirement Machine will suggest an asset allocation calculated for actual withdrawal needs. Everyone (and every organization) that has distribution needs will find this tool critical in the management of a portfolio.
Who Needs It?
The Retirement Machine provides clarity to anyone who has to take distributions (like retired folks, charitable foundations and many organizations). This tool will run various scenarios and report results but unlike other tools in the industry, The Retirement Machine will create an allocation… one that supports the solution. This tool can find an optimal solution to each of the following questions: * How much spending can be supported for my (our) anticipated lifetime? * How long will the portfolio last with a stated spending need? * What size does my portfolio have to be in order to support the stated spending need? The Retirement Machine then provides the answer and creates a portfolio allocation that supports the solution presented. The allocation presented will, very simply, consist of a Distribution Fund and a Harvesting Fund. The Distribution Fund is designed to hold stable or low duration type investments, in amounts that are calculated to meet all the liquidity needs and provide withdrawals over the stated time horizon. The Harvesting Fund is designed to hold growth type investments. It is accessed only at the completion of each time horizon, or when investments are valued relatively high and an early harvesting is desired. No investments are recommended or suggested for these funds, only the allocation. Freedom of choice is a fundamental conviction in the creation of this tool. The Retirement Machine not only clearly documents the liquidity needs of the portfolio, it also recommends an allocation that will support the very specific cash flow requirements of that defined liquidity need.
Why Is It Needed?
When it comes to planning for retirement, the biggest unknown is the correct amount to spend during retirement. Using typical industry practices, conventional wisdom says to take withdrawals that represent a small percentage of the investments and add them to other sources of income such as Social Security and pensions. Then trusting in the long-term returns of the retirement portfolio all should work out well. But in retirement, withdrawals need to be made, and it’s those very withdrawals that change everything. The withdrawals change the investors return and from the very first withdrawal. The investment will get the long-term return but from the very first withdrawal the investors return is forever altered. There are two returns, the investments return and the investors return. The strategy implemented to get to retirement may not be the best strategy to get through retirement. A different strategy is needed…one that takes into account the effect withdrawals can have on a retirement portfolio. The Retirement Machine is based on a strategy that takes into account the need to take withdrawals during retirement and the potential hazards those very withdrawals pose to the retirement portfolio’s ability to obtain its very own investments return.