The unknown unknowns of Retirement Planning.

Retirement planning is sometimes seen as something of a nightmare for individuals who’re almost at the point of retirement, or workers who’re considering how they would get on once they hang up their boots!

Donald Rumsfeld was once the Secretary of Defense for the United States. One of his most famous quotes at the time is quite apt when it comes to capturing the mood around pensions and retirement planning. He said, “…reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know”.

Quite a mouthful isn’t it? This is true however when you consider retirement planning and pensions for individuals. Financial planners sometimes face the headache of trying to come up with, well, a plan for retirees. There are all sorts of scenarios to plan for; eventualities that may or may never occur, trends that have occurred in the past but the chances of them recurring in the future is anyone’s guess, and so on. Some financial advisers like to focus on market returns as the be-all-and-end-all. It’s almost as if every single episode in the journey of the retiree is solely dependent on this one factor – including volatility, the bulls, the bears and anything else you might want to throw in there that affects stock market performance. But, is it true and does retirement planning have to be such a minefield?

Introducing Timelineapp, the next generation software that creates, illustrates and manages withdrawal strategies that are sustainable for its clients. Timeline is unique simply because it uses extensive empirical data (asset class data and longevity data) that assists financial planners in answering their clients’ big retirement questions (remember all those unknowns and knowns?). What makes Timeline so impressive, is it captures events that have occurred in the past and lets you see how your client’s portfolio would perform in similar scenarios. Crucial world events from the world wars, the Great Depression, the high inflation period of the 1970s, the dot-com bubble and more recently, the global financial crisis are accounted for in Timelineapp’s software.

At a glance, an adviser can see what would happen to their client’s portfolio and if this is sustainable over the course of their retirement journey. Adjustments can be made for asset class allocation, portfolio rebalancing, withdrawal orders, taxes, fees and much more.

Timeline is unique because it lets you see at first glance (and in more detail) the performance of a client’s retirement journey and whether the client would be better or worse off, depending on their individual plans. That is, how their asset allocations, including the impact of taxes and fees would perform in these real-world scenarios.

An important point to remember is that if the withdrawal strategy for the client is sustainable, it tells you how much the client can take out from their savings without leaving them significantly worse off in retirement.

We’re all living longer now, which is a good thing. How we plan for our years in retirement is therefore extremely important. Events could occur that would make our retirement journey comfortable or not so comfortable. Timelineapp greatly helps us to understand the possible impact in a visual way. It also makes client conversations about the unknown unknowns in retirement much easier and more effective.

Toyosi is the Pension & Technical Consultant at Timelineapp. His experience is in Financial Services and consulting (“Big-4”). Toyosi has the IMC qualification and is a member of the CFA Society of the UK and the Chartered Insurance Institute. Toyosi is one of our content contributors and is often writing articles on retirement and the sustainable withdrawal framework.


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