Retirement Income Case Study Master Class

Financial advisers meet hundreds of clients over their careers, and many sit outside the ‘vanilla’ planning mould.

Retirement, in particular, encompasses the full spectrum of human goals, fears, needs and complexities, all of which need to be carefully considered and factored into retirement planning. And many of which don’t stand still. That’s what makes great advice so valuable – and why flexible and reliable retirement income solutions matter.

In this series, the Lifetime Retirement Income Case Study Master Class, we explore real world scenarios that challenge traditional planning assumptions and show how the Lifetime Retirement Income Fund helps advisers deliver clarity, confidence, and an income their clients can rely on, without the weight of the administrative burden.

This edition focuses on a common but often tricky request: ‘We want more income now, and less later’, and on a scenario in which the couple consists of two males, resulting in a different mortality and longevity profile than may be the case with a heterosexual couple.

Meet Robert and Peter

Robert (67) and Peter (69) live in Wellington and have been married under a civil union for several years. After long careers in the public service, they’ve built a solid financial foundation:

• $400,000 in retirement savings
• A mortgage free home
• Good health and an active lifestyle

Now fully retired, they’ve taken a close look at their spending patterns and realised something important: they want to enjoy higher income while they’re younger and more active, then taper it as they age.

Their income goals

Working with their adviser, Robert and Peter agreed on a clear plan:

• $630 per fortnight in additional income (on top of NZ Superannuation’s $1,706)
• Income paid until age 85, then reduced by 30%
• Income continues until age 95
• Automatic 2% inflation adjustment
• Payments aligned with NZ Super pay dates
• Capital accessible on demand
• An annual income review, with a 0.25% adviser fee
• PIR: 17.5%

This is a common retirement income pattern that may seem simple but can be difficult to calculate without the right tools.

Making the complex easy

Using the Lifetime Retirement Income ‘Adviser Calculator’, advisers can model sophisticated drawdown strategies fast, with no spreadsheets, no actuarial guesswork and no stress. But with the knowledge there is some serious actuarial firepower sitting behind the numbers.

The calculator automatically incorporates:

• Mortality assumptions
• Inflation
• Expected returns
• Tax
• Longevity risk
• Adviser remuneration
• Annual income adjustments

For Robert and Peter, the calculator shows that  $356,500 of their $400,000 is needed to generate the income they want through to age 95. And their adviser receives a ready to use income estimate that can be dropped straight into their Statement of Advice.

Robert and Peter’s Annual Cash Flows

The key facts for advisers in these calculations are:

• Lifetime Retirement Income Fund remuneration: 0.30% p.a.
• Adviser remuneration (deducted by fund): 0.25% p.a.
• Expected gross returns: 5.5%
• PIR: 17.5%
• Mortality ages: Robert 84, Peter 85
• Probability income remains unchanged until depletion: 80%
• Inflation adjustment: 2% annually
• Income paid automatically by the fund
  
  
  

Annual review – done for you

One of the most powerful features of the Lifetime Retirement Income Fund is the automatic annual review.

Each year, in this case on Robert’s anniversary date (as it is based on the youngest person), the adviser receives a comprehensive recalculation of the couple’s income settings, including:

• Updated account balance
• Inflation
• Mortality improvements
• Investment returns
• Tax changes
• Recommended income adjustments (increase, decrease, or unchanged)

This ensures the couple’s income remains aligned with the original plan – without the adviser needing to run complex projections or re-model the plan manually.

What this means for Robert and Peter

With the Lifetime Retirement Income Fund, Robert and Peter receive:

• A tax paid income supplement starting at $630 per fortnight
• Annual increases of 2%, reaching $883 per fortnight by age 84
• A step down at age 85, back to $630
• Continued inflation increases thereafter
• Income lasting until age 95

Behind the scenes, Lifetime handles all the actuarial calculations, longevity and mortality modelling, and investment assumptions – giving both the couple and their adviser confidence and certainty.

…And in a world where certainty can be in short supply – and with clients' needs continually evolving – that’s pretty valuable.

Please note: Robert and Peter are 'composite' clients, representing a scenario advisers are likely to be presented with. They are not real people, nor intended to represent specific clients.