A New Matrix for Personalizing Retirement Income Strategies

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A new study identifies a set of scorable retirement income factors that can help define preferences for an overall retirement income style, which can point toward an appropriate retirement income strategy.

In “Selecting a Personalized Retirement Income Strategy,” published in the Retirement Management Journal, Alejandro Murguia, PhD, managing principal of McLean Asset Management and Retirement Researcher, and Wade Pfau, PhD, professor of retirement income at The American College for Financial Services and founder of Retirement Researcher, explain how they developed a multidimensional tool based on an analysis of existing research and a multipart survey of more than 1,400 participants.

As background for initiating the study, the researchers note that for those who have been saving in anticipation of future retirement, questions remain about what to do with accumulated assets upon reaching retirement. Yet, at present, the guidance and strategies provided to retirees still largely depend on the viewpoints of a relatively small number of pundits and stakeholders, they contend. And while there are various options for retirement income, no one approach may work best for everyone.

RISA Matrix

As such, in their analysis they identify six factors that pinpoint distinct retiree preferences through what they call the Retirement Income Style Awareness (RISA) matrix:

  • probability-based versus safety-first;
  • optionality versus commitment;
  • time-based versus perpetuity income floors;
  • accumulation versus distribution;
  • front-loading versus back-loading retirement income; and
  • true versus technical liquidity.

Murguia and Pfau note that the idea is to create a workable model for retirement income planning by identifying retirement income styles and matching those styles to the quadrants of the RISA matrix and their related retirement income strategies. For those individuals working with advisors, the researchers suggest that their study can aid advisor understanding about an “agnostic approach” to retirement income and the applicability of various strategies.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersA New Matrix for Personalizing Retirement Income Strategies

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