In study after study, baby boomers say they are concerned about healthcare costs and long-term care in retirement, but their biggest fear by far is outliving their savings.
Will you have enough? How do you know?
Most of us have been programmed to focus on the accumulation phase of our financial lives and for many years, that was appropriate. We were concerned about how much to save, where to invest, tax-deferral, asset allocation, rebalancing and of course, fees!
But as we approach retirement, it stops being about accumulated assets and our focus naturally turns to income. How can we convert our nest egg into an income stream that will enable us to maintain our desired lifestyle without running out of money?
This brings up more questions. From which accounts will you withdraw the money you need each year? When should you claim Social Security? What about home equity and reverse mortgages? Do income annuities make sense?
For do-it-yourselfers, online retirement calculators aren’t particularly helpful. For these kinds of specific questions, it’s best to work with an experienced Investment Advisor. Most financial advisors I know rely on Monte Carlo simulations to predict the potential success or failure of hypothetical withdrawal strategies, which may leave some clients unsure about having sufficient retirement income they can count on.
“The problem for those heading into retirement is that current industry tools do not consider maximizing long-term wealth, and they are limited since they frequently rely on the guesswork of advisors or assume common rules – such as an initial withdrawal rate of 4% of assets increased annually by inflation, or the withdrawal of taxable savings first, then tax-deferred, then tax-free. In addition, these generic rules largely ignore the tax impact and are far from providing maximum wealth growth for clients”, says Jonathan Coopersmith, President of VestaEdge, Inc.
When I met Jonathan in 2017, he enthusiastically explained that VestaEdge was founded to fill a need in the financial planning space, that of “tax-optimized asset decumulation”.
VestaEdge is currently developing a revolutionary cloud-based financial planning platform that is unlike any planning software currently available on the market – a SaaS-based software application called Vestasm – which is the product of over 8 years of research and development by Jonathan’s father Lew Coopersmith, PhD, Professor Emeritus of Management Sciences at Rider University where he lectures on statistics, forecasting and operations management. The company has turned that research into a unique solution that leverages linear programming optimization techniques and complex algorithms to help maximize wealth in retirement.
Intrigued by the possibilities, I asked Jonathan to tell me more. “The key differentiator for Vestasm is that our process uses the power of mathematical optimization to maximize long-term wealth, offering specific annual tax-optimal withdrawal plans to meet and enhance a client’s desired lifestyle expenses,” he said.
I learned the platform supports all major asset types, including Roth accounts and conversions, and incorporates projected future returns into the solution. Vestasm also facilitates better planning and management of pre-retirement assets, providing instant answers to “what-if” scenarios, leading to an improved quality of life before and during retirement.
“Vestasm supports pre-and post-retirement planning, and facilitates greater wealth growth – 50% or more is not uncommon – for both advisory firm customers and individuals”, Jonathan continued. “It enables an accurate estimation of federal taxes for each year of the plan; these include all tax brackets, itemized or standard deductions, exemptions, tax on Social Security, required minimum distributions (RMDs), long-term capital gains, and more.”
So, while baby boomers focus on retirement income and expense management as they draw down on their accumulated wealth, VestaEdge provides the missing piece of the puzzle – an optimized withdrawal strategy to maximize wealth in retirement, without relying on generic rules.
Where can anxious retirees get access to this powerful optimization tool? The best way would be to contact one of the growing number of savvy financial advisors using Vestasm to add value for their clients.
Once they understand its capabilities, I can’t imagine an Investment Advisor not wanting to use a platform like this, so if yours doesn’t, ask them to contact VestaEdge to learn more and request a demo. If your advisor is hesitant, tell them you don’t have time to leave money on the table.
VestaEdge is still a startup company, and they are currently seeking investment capital to grow their platform and make it more widely available.
I believe Vestasm will be a game-changer for boomers looking to maximize their retirement income, so they can live better, longer.