Making Your Money Last

A Different Kind of Diversification Pays Off for Retirees

Retirement savers can get more income with less volatility using income allocation instead of asset allocation.

Before you take the leap into retirement, you want to feel completely confident that your money will last. It’s natural to want to be sure you have enough saved, but rather than focusing on savings, you should be looking at how you’re going to create income instead.

The goal: Create more income with less volatility. It’s something I’ve been studying, and I have some exciting results to share.

In Part I and Part II in this series, I suggested that you could receive more retirement income with less volatility if you and your adviser move from a strategy of asset allocation to one of income allocation. Asset allocation is the traditional strategy in which you strive to have diversified investments to maximize and protect your assets. Income allocation, on the other hand, is a strategy in which you put together a plan with different sources of income that will be reliable and lasting in retirement.

We conducted a study comparing the results between asset allocation and income allocation strategies under various assumptions as to the retiree’s risk profile and market outlook. Not only did we observe more retirement income and less volatility with income allocation, but we also saw generally higher economic returns. A copy of the study is available for free when you register on the Go2Income website.

Having a higher economic return in addition to the features and “soft benefits” described below, makes a strong case for the income allocation strategy.

Sample Case

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For this article, we selected the following case from our study: Male, 70, who has $1 million in retirement savings, with 50% in a rollover IRA. His risk profile is conservative, with an asset allocation of 30% to equities, based on the “100 minus age” rule of thumb, and 70% to fixed income securities.

We compared the asset allocation strategy to an income allocation strategy with a high allocation to income annuities. Both strategies assume identical market returns.

Here are some highlights of the results of income allocation in this case:

  • After-tax income is increased by 50% over the investor’s lifetime.
  • Income volatility is reduced from 69% to 19%.

The investor can spend the extra income or reinvest it to leave a legacy as much as 29% higher.

Sound too good to be true? Let me walk you through the numbers and the explanation for these advantages.

Review of Income Allocation Strategy

The twin goals of income allocation are to increase the amount of after-tax (spendable) income and to reduce income volatility (for more dependability). These three steps distinguish the income allocation strategy from virtually all other retirement planning strategies.

About the Author

Jerry Golden, Investment Adviser Representative

President, Golden Retirement Advisors Inc.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at, where consumers can explore all types of income annuity options, anonymously and at no cost.

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