Topic 6 – Income Allocation Strategy

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As we’ve now learned, income allocation is a mix of two strategies in one. We don’t have all of our eggs in one basket. The income allocation strategy uses two strategies combined, one for income, and one for growth. For the income side, we have a predictable, measurable retirement income stream that comes to us through the forms of insurance annuity products. Secondly, that income is measurable. We know how much we can take out because it’s contractual by the insurance company as to our withdraw rate that we’re allowed under the contract. It’s sustainable because our income stream will last as long as we live, even if the principle runs out, the insurance company will still continue to pay you’re guaranteed lifetime income benefits. In our second portion of our income allocation strategy, we’ll invest for growth and we’ll use a defined outcome investing plan. We’ll determine what your risk is, and then we’ll set some parameters for how much you’d like to withstand and loss to receive potential gain on the other side.

If risk and reward are always traveling, companions we’ll still have to have a little hope for these assets to grow, but we won’t be dependent on them to grow because we have our income taken care of on the income side. We’ll also mix various asset classes and product solutions in this defensively managed portfolio if you’d like to be risk averse still and make sure that this money is close at hand, when you need it in retirement. This will include active and strategic and tactical approaches to your investment management. And this will also give us an account which offers us enhanced liquidity. We can have our money when we want it, and it’s grown over time. We just will want to make sure that we don’t take it out when markets are down because we’ll surrender more shares at that point to get the same dollars. So we have a combination strategy with income allocation that is more appropriate for the income planning retiree versus the growth oriented accumulator. And this is why income allocation is the strategy of choice for our retirees at The Coastal Financial Planning Group.

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