Retirement Floor And Upside How To Calculate Floor

I agree 100 with you that the floor and upside model but have also come to the conclusion that if you can afford to adequately fund this model you don t really have a retirement income problem floor and upside is quite expensive because you have to fund 30 years or so of retirement with low yielding treasuries.

Retirement floor and upside how to calculate floor.

Social security is calculated on a sliding scale. The floor and upside strategy for financing retirement is sometimes referred to as safety first and derives from the theory of life cycle saving and investing 1. And finally the fun part of the talk. The basic idea behind floor and upside is that a retiree devotes some of her retirement funding assets to building a lifetime stream of income and the remainder to an investment portfolio to provide liquidity and the.

First i will explain what a utility function is why it is important and what floor and upside utility functions look like. That the fundamental goal of retirement income planning is to first build a floor then expose to upside the riia s goal can be reconciled with the fpa s categories by remaining aware about the potential flooring available with current retirement assets. The basic idea was this for someone with the asset capacity to be able to execute a floor and upside strategy. Lastly i presented the case for annuitizing as needed during the latter phase of life.

So that is a non technical overview of how to establish a retirement income floor while keeping an upside. Riia has also created a client segmentation matrix that advisors can use to identify which investors need a floor as part of their retirement income investing. We will explore the optimal investment. At the same time the retirement income industry association riia argues that the fundamental goal of retirement income planning is to first build a floor then expose to upside the riia s goal can be reconciled with the fpa s categories by remaining aware about the potential flooring available with current retirement assets.

This highlights that there are two ways to think about retirement income flooring. The floor plus upside strategy of planning for retirement is a strategy espoused by retirement income industry association founder francois gadenne and it follows a very basic premise but one that after seeing the worry in the faces of many middle americans makes a lot of sense. Use this retirement calculator to create your retirement plan. Then using a floor and upside utility function i will cover how to compute the optimal investment strategy despite the uncertainties that exist.

But the floor is just one component of the investing strategy. The companion component is the search for upside through exposure to risky assets such as equities. I started by reviewing the risks to a distribution portfolio.