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Personalized optimal strategy to enhance the outcome in retirement – Discover & Manage


Investment advice software for Baby Boomers transitioning into, and living in, retirement.
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Income Discovery is an investment advice software that focuses on transition into, and living in, retirement for the baby boomer segment, building a personalized optimal strategy for them; a strategy that is personalized to the unique preferences of the client for their varying expenses in retirement, separate retirement timing, etc.

Enhance Retirement Outcome

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To find an optimal strategy, an objective basis is needed. A risk-reward retirement income analysis framework was proposed in the JFP paper referenced below. The framework was subsequently enhanced using behavioral finance research — with no use of the words "probability of failure," but rather positioning it as the risk of shortfall in X out of Y, a frequency presentation.

Through Optimal Strategy

Optimal Social Security claim, investment and annuity mix

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Retirement income strategy is not just about investments. It involves claiming decisions for Social Security, purchase of annuities and timing of annuitization and taxes. Seemingly trivial decisions can have a significant impact on the retirement income plan. Efficient algorithms and heavy computing power can find a personalized optimal strategy for a couple that will provide them an enhanced outcome in retirement compared to the strategy they would have pursued on their own.

Optimal Annuities Mix

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The majority of baby boomers will need to seriously consider annuitization to take advantage of economic efficiency of the longevity risk pooling to support their desired lifestyle. The industry currently takes a narrow approach of trying to sell an annuity rather than building a solution for the client that mixes annuities with investments. In the solution approach, they may find, as discovered by Income Discovery software, an optimal mix of the different types of annuities for the client.

Outcome-Based Strategy Selection

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The industry currently takes the approach of finding an asset allocation for the client based on the risk profile and then building a financial plan using that allocation. That approach is predicated on the assumption that the highest volatility portfolio within the client's risk tolerance is best for the client because it provides the highest expected return. In the retirement distribution phase, when the portfolio is being withdrawn from, that assumption is not good, as demonstrated by Bill Bengen in his work. Many times, a lower risk-lower return portfolio may provide the client a better outcome in retirement. This better outcome is what Income Discovery finds for the client using outcome-based optimization — AND it is the only investment advice software that does this kind of optimization.

Personalized Tax Optimal Withdrawal Order

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The industry currently practices a few rules-of-thumb for withdrawing across different tax type accounts. There is no one common withdrawal order that will be best for all situations. The client's unique situation determines the withdrawal order that will provide the best outcome in retirement — and that is what Income Discovery's optimization engine will find for the client. For some client situations, albeit counterintuitive, liquidating a Roth account first may provide the best outcome.

Personalized Glide

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Similarly, the decision about withdrawal order doesn't sit in isolation. With it, the asset allocation decision is tied. If an account, e.g., Roth, is put last in the withdrawal order and is very likely not to be withdrawn at all, or only after 20 years, it is possible to invest it more aggressively than the accounts that will be withdrawn from first. This joint optimization of all decisions about retirement, which is necessary to provide prudent advice, is provided by Income Discovery.

Income Discovery features one-click optimization that will evaluate a large number of strategies selected by the user and find the one among them that provides the best outcome in retirement.

DOL Fiduciary Rule

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Under the new DOL Fiduciary rule, any recommendation — buy, sell, hold or distribute — in a retirement account is a covered recommendation, ie, a fiduciary investment advice. Each rendering of that advice requires a justification, and if that advice generates variable compensation, then specific steps under one of the Exemptions are required. How can you justify that the advice is good for the client?

Best Interest Justification

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Read our white paper on how Income Discovery helps comply with the Department Of Labor Fiduciary Rule and more importantly an opinion letter from a leading ERISA law firm, The Wagner Law group.

Value Proposition

We offer multiple tools and services to support
the full business process for retirement income