How Successful Advisors Are Adopting a Carton Approach

Covisum’s new white paper, “The Extinction of the Nest Egg: How Successful Advisors Are Adopting a Carton Approach,” discusses a shift in the concept of a retirement nest egg to a carton approach. A modern retirement strategy actually reflects multiple income streams and how income is withdrawn can be tricky to navigate.

Historically, a sum of money saved for the future was described as a “nest egg.” However, many Americans actually have multiple options for saving for retirement: 401(k)s, 403(b)s, IRAs, fixed annuities, certificates of deposit and more. In addition, many working Americans receive some retirement income from Social Security or pensions. So, instead of the single nest egg, many people actually have a carton of retirement income options.  

“…Retirement planning is less about helping clients save and manage a single nest egg and more about helping them crack the right egg at the right time,” said Joe Elsasser, CFP®, Founder and President of Covisum.

Many Americans naively believe that a retirement strategy is as simple as claiming Social Security and making 401(k) withdrawals. It might be that simple for some, but for others, the interactions between the different income streams can create some real headaches later in retirement. However, since they are unaware of these complex interactions, they don’t seek-out a financial advisor to assist them, or if they do, they are looking for specific advice about one particular element of their retirement.

So, how can advisors help prospects and clients see the value of their services? Technology can now integrate retirement considerations in a process that is easy for both the advisor and the client to understand. Graphs and charts can visually demonstrate that retirement decisions should not be made in a vacuum and show how the different decisions interact. With the right tools, advisors can test the strategy against unexpected stress events like a down-market or an early death.

Determine the Success of a Retirement Strategy by Analyzing:

  1. Portfolio Longevity—How long does the portfolio last? Does it last through the client’s retirement
  2. Sustainable Income —If the portfolio doesn’t last through retirement, how much of a client’s after-tax monthly income need will be met by their monthly income streams such as Social Security and pensions. Obviously, a retired teacher who has 95% of her monthly income need met by these sources is much less concerned than a retired upper manager whose Social Security is his only monthly income source and it’s only meeting 20% of his income need.
  3. Estate Value—If the portfolio does last through retirement, what is the net, after-tax estate value that is left behind to the people of causes your client cares about.

Making a Measurable Impact for Clients

Clients will start to see how you can save them from unnecessary headaches in retirement caused by an unforeseen tax jump or a less-than-optimal Social Security claiming decision. They’ll see how the unique strategy you’ve presented to them can save them thousands of dollars that otherwise would have gone to taxes. They will see the value of working with you.

Advisors with the right tools and knowledge can deliver smart, sophisticated retirement income plans that pull from many income streams, not just one.

“The Extinction of the Nest Egg,” explains:

  • How the current tax system, Social Security rules and other factors interact.
  • How you can identify and address the issues created by these interactions.
  • How you can clearly communicate these complexities to clients and differentiate your practice.