What Your Profile Suggests (RISA): Unlocking Your Ideal Retirement Income Strategy

Scott Sullivan |
Categories
Retirement Planning

Planning for retirement income can feel complex, with many conflicting viewpoints and strategies available. The truth is, there isn't a one-size-fits-all approach to retirement income. Your unique preferences, financial goals, and comfort level with different types of risk are paramount in determining the most suitable strategies for your retirement.

This is where understanding your Retirement Income Style Awareness (RISA®) Profile becomes incredibly valuable. The RISA® Matrix is a framework developed to help individuals and their financial advisors quickly understand these preferences and align them with appropriate retirement income strategies. It assesses your preferences across two primary dimensions:

  • Probability-Based vs. Safety-First: This factor helps to identify whether you are more comfortable relying on market growth potential or on contractual protections and guarantees as an income source for your essential retirement spending.

  • Optionality vs. Commitment: This factor describes whether you emphasize keeping options open so you can make changes, or whether you prefer to commit to a strategy known to solve for a lifetime retirement goal.

By intersecting these two dimensions, the RISA® Matrix defines four distinct retirement income styles, each aligning with different types of strategies:

  • Total Return (Probability-Based & Optionality): If your profile aligns here, you likely seek to maximize growth potential from a diversified investment portfolio. You value flexibility and want to maintain the ability to adjust withdrawals as market conditions change. This strategy relies on the probability that investments will perform well enough to sustain spending, without contractual guarantees.

  • Income Protection (Safety-First & Commitment): This style is for those who prioritize contractual guarantees to cover their essential expenses for life. You are comfortable committing to solutions like Social Security, pensions, and annuities to create a predictable income floor, transferring risks like longevity and market volatility to insurance companies. Research suggests that approximately 67% of individuals are looking for strategies that extend beyond a purely Total Return investing approach, often seeking greater contractual protections and commitments for their essential expenses.

  • Time Segmentation (Safety-First & Optionality): This hybrid approach appeals to those who like contractual protections but also value flexibility. It often involves a "bucket" strategy, where short-term needs are covered by more secure, fixed-income assets (like cash equivalents or short-term bonds), while longer-term goals rely on a more aggressive, growth-oriented investment portfolio. This strategy aims to provide comfort during market downturns by having accessible safe funds.

  • Risk Wrap (Probability-Based & Commitment): Individuals with this profile desire market participation and growth but also seek a structured and secured income stream. This often involves products like variable annuities or fixed index annuities with guaranteed lifetime income benefits (GLWBs), which can offer upside potential while providing a degree of downside protection and commitment to a lifetime income.

Understanding your RISA® Profile is crucial because "the right starting point is the one that is most aligned with an individual’s preferences". Your RISA profile reflects stable preferences that remain consistent as you age or retire. This personalization can lead to increased confidence and reduced anxiety in retirement, as you are more likely to adhere to a plan you are comfortable with.

To gain clarity on your unique Retirement Income Style Awareness (RISA®) Profile and to build a comprehensive, personalized retirement income plan that effectively manages key retirement risks, consider working with a qualified financial advisor. They can help you assess your unique goals and integrate multiple income sources into a strategy tailored specifically for you.

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