Income Strategy Generator
There are countless
software programs available to assist with financial planning.
But there are relatively few designed specifically for optimizing
steady, dependable, and long-term investment income. The ones
that are intended for this purpose often focus on identifying a safe
withdrawal rate for a Systematic Withdrawals approach using
either historic rates of return or a Monte Carlo
algorithm. They focus on withdrawal rate and neglect
Assets are typically allocated according to Modern
Portfolio Theory principles and classic measures of risk
though these methods were not designed for distributing income.
The Income Strategy Generator or ISG software is
different. It is based on a strategic approach to withdrawing
investment income that we call Defined Withdrawals. An Income
Ladder of fixed-rate investments is used to create certain (or
defined) income for a predetermine number of years. Often the
income ladder is supplemented with stock dividends. Stock
investments are used to provide long-term growth and inflation
protection. The income ladder allows stocks to be held for the
long-term when necessary. Good diversification coupled with some basic guidelines about when to sell stocks,
are also key to
achieving desirable results. We call this Navigating.
See our free book
for a more complete explanation.
With a Defined
Withdrawals plan, the asset allocation is not driven by a fuzzy
measure of risk tolerance. It is driven by the
the income ladder. For example a plan with a 12-year income
ladder will require more fixed-rate investments, and is more
conservative, than a plan with an 8-year income ladder. This
type of asset allocation offers a more meaningful and intuitive way
to assess risk when steady and dependable income is a
This is a unique
planning tool, and we are certain there is nothing else like
it. A great way to better understand its capabilities is to
download the free accompanying book and review the
examples. The software also
provides an extensive set of printable color graphs and reports.
If you are a financial
advisor and looking for a way to develop and build your
retirement income planning business, this is an ideal tool
for you. Use it to differentiate yourself from the systematic
withdrawals crowd and to provide more strategic income
plans to your clients.