I have built Mavericus to assist retirees in generating income to cover their spending needs and goals and address their choices in covering healthcare costs. It has been designed to help those who don’t wish to pay 1% to 2% in annual Asset Under Management fees nor wish to have a product sold to them by their financial adviser. Given the same level of advice, when one lowers the fee drag on retirement assets, more retirement income and larger future inheritances may be generated. Generating income you can rely on for as long as you need it doesn’t have to be hard. Optimize your Social Security options, create reliable income streams, invest appropriately in a diversified portfolio of low-cost index funds based on your retirement income risk tolerance, and make the appropriate health insurance decisions each year.
To reiterate, a retirement income plan should be built to address spending needs and goals. Essential spending needs should be covered by reliable income sources like Social Security, a pension, or an annuity (purchased without a full commission built in). Social Security is the most valuable asset each of us have in retirement. It protects against longevity risk, inflation risk, and provides a survivorship benefit to a spouse. Further, it’s not taxed to the same extent as other forms of retirement income. If you’re willing to be flexible year to year, discretionary expenses can be covered by income generated from riskier assets such as stock funds. Using what is referred to as a “dynamic” approach, income can be adjusted year to year based on investment returns, changes in spending goals, and changes in health status.
A solid retirement income plan addresses the long-term as well. If you’re married, one of you will outlive the other. It’s important to make sure that a surviving spouse has the income she/he needs for the remainder of life. Although we don’t like to think about it, it’s also beneficial to have pile of assets available for late-in-life healthcare needs. Often, projected home equity can be used for this purpose.
Mavericus has also been built to help retirees make tax-smart decisions. There are levers that can be pulled to keep taxes lower. Roth conversions over time, IRA to HSA conversions, strategic HSA withdrawals, delaying Social Security claiming, filling up lower tax brackets in an optimal way. The lower you can keep your taxes and Medicare surcharges, the more time you have to invest and grow your retirement wealth.
Therefore, the goal is to build a resilient retirement income plan that is tax-smart with very little fee drag. Doing so allows you to have CHOICES throughout your retirement.
I’m passionate about building resilient retirement income plans because I believe that they address multiple generations. If you or a spouse runs out of income, you may need to rely financially on your children. If you fail to plan for late-in-life healthcare costs, your children may have to take care of you. On the other hand, if you have developed a resilient retirement income plan, you can help your children and grandchildren out via gifts as you wish because you have reliable income coming in for as long as you will need it.
When you do this, you can unleash a more enjoyable retirement, feeling more comfortable spending and gifting to your children (who likely face high housing prices and college education costs for your grandchildren). I also believe that a resilient retirement income plan will lead to less stress due during periods of market volatility and economic shocks. From what I have researched and read, stress leads to inflammation, which leads the body to break down more quickly both physically and cognitively.
I’ve been studying research and publishing articles and papers for years. In my opinion, three wonderous factors have changed financial planning over the last decade. First, great research has been published by Michael Finke, David Blanchett, Wade Pfau, Michael Kitces, Moshe Milevsky, William Reichenstein, Alicia Munnell, Steve Vernon, Olivia Mitchell, and others. This research allows us to think differently about building a resilient retirement income plan and do so in ways that address the behavioral finance issues that have surfaced in the move to a 401(k) world.
Secondly, great financial planning software has been developed to allow a solo practicing Registered Investment Adviser to help clients build reliable income streams, optimize Social Security, make tax-smart decisions, avoid Medicare surcharges, and make the intangible (future income and investment values) more tangible (so that retirement can unleash spending).
Thirdly, the COVID-19 pandemic has lead to not only widespread work from home but a growing comfort to deal with providers from home. In other words, many individuals have been given the tools and wherewithal to deal with a financial adviser who may be six states away. This gives consumers more choice and will lead to lower fees since consumers are now empowered to better shop for a financial adviser.
The financial plannning world is changing and it’s coming at the right time with so much risk and responsibility having shifted to retirees in the move from traditional pensions to 401(k)s.
Thanks for reading.
Jim Mahaney
September 2022
