Turn Retirement Income Into a Positive Outcome

Investing & Retirement

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[Host] Roughly 10,000 baby boomers are reaching retirement age every day, and planning for life's next chapter is more important than ever. Joe Sicchitano, Senior Vice President and Head of Wealth Planning and Advice Delivery for Truist Wealth, offers his insight on the changing landscape of retirement planning. He notes that as investors are continuing to ask the big questions, there’s one critical factor—sustainable withdrawal rate—that many fail to consider.

[Joe Sicchitano] The withdrawal rate concept is really about answering the question: What amount of income can a retiree expect to or need to receive yearly on some type of consistent basis, that is sustainable throughout their individual or joint life expectancy? I think the concept of withdrawal rate is wildly overlooked. There's been a lot of focus on, what should my number be? And that question has since changed.

As people get closer to retirement, they're thinking less about the number that they need to have accumulated and more about, what experience are they really looking forward to. How do they want to live? What do they want to experience? And then backing in to, what kind of income will allow me to sustain that experience that I'm striving for?

That leads to a discussion about withdrawal rates and drives questions about, how do I maximize that income?  How do I avoid taxes?  How do I minimize risk, etc.  It's not the same retirement anymore. It's really about seasons. A lot of people are thinking about retirement in that way.

[Host] From demographics, to investing styles, to the health of the economy, the state of retirement planning is changing.  

[Sicchitano] There are fewer traditional pensions, and there's more of a burden on the individual to accumulate that money, which means that those types of stable sources of ready income like a traditional pension are less predominant, and I think forces people to think about their retirement differently. Concern has moved from the traditional question of, "Do I have enough money" towards questions like "Will it sustain me through my life expectancy?' And people are living longer, so that question of, "Will it last?" is a deeper question than it has traditionally been in retirement planning.

And lastly, with a lot of the economic turmoil in the past couple of decades, there's a certain form of recency bias that is setting in. What that translates to in terms of concern is you have a lot of people who want certainty in that retirement picture.  They want contingency planning. They want to know that if something like that happens again, what is my plan to adjust to that?

[Host] As is true with most financial decisions, the earlier someone can start considering withdrawal rates, the better. Sicchitano offers some insight on how investors can make sure they have a smart plan for their specific retirement goals.

[Joe Sicchitano] If you want to have flexibility in your retirement picture, especially around the concept of withdrawal rate, there's a way to think about your retirement in terms of three buckets. It's really advisable to have different sources of income when you retire. Tax-free sources, taxable sources, tax deferred sources … all allow you a certain degree of flexibility when you're planning for withdrawal rates.

[Host] Talking to a financial advisor is a great first step toward retirement planning, but it's not the end of the process. For investors who want to conduct some independent research, there are helpful tools online.  The Truist approach to financial planning allows clients to do a number of interactive pieces, particularly around stress testing their plans. For example…

[Sicchitano] We have a set of tools called LifeYield and what that allows us to do is be very, very smart, very intentional around how we actually structure that retirement income. It looks at how after-tax returns can influence retirement income. It looks at asset allocation, of course, which is always important, but it takes that a step further and thinks about what we call asset location—where should those assets be in terms of the vehicles that they reside in? Now, independent white paper studies will suggest that paying attention to those types of components can add quite a bit of benefit to somebody's retirement picture. 

[Host] Sicchitano takes a systematic approach as he helps his clients determine how to achieve their retirement goals.

[Sicchitano] When we and our advisors work with clients to think about this, we approach it in pieces. We think in terms of, what are those seasons in retirement? How do things change? What should we be planning for? So, making sure that we have adequate cash reserves, adequate sources of income that could maintain us, say, during a market downturn, is very important for us to plan for.

What it does is, it takes a lot of the fear and anxiety that people feel around retirement, it takes that monster, if you will, out of the closet, and determines, is it really scary enough for us to worry about? We know the market's gonna cycle up and down, but what's our plan for that? If we can pre-rehearse that type of decision, it's very valuable to a retiree.

[Host] Thanks for sharing this great insight, Joe. For more information, contact your Truist advisor or visit us online at Truist.com/wealth.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

Truist Investment Services, Inc. has a minority interest in LifeYield, Inc.