A cross-check on your Retirement Income Challenge plan

I recently attended the Retirement Income Challenge offered by Retirement Researcher the education/research arm of McLean Asset Management. These sessions helped investigate your Retirement Income Style Awareness (RISA®) and use a proprietary tool to determine your Funded Ratio which estimates your chances of meeting your goals using a very conservative approach (100% bonds). This conservative perspective is not ‘wrong’ but does tend to push a participant to believe that they need HELP. I may be jaded but it does appear to be a sales pitch for McLean and while you may desire help, I offer here a way to balance the overly conservative view.

My funded ratio shows “Under Funded” by $6,260,642.
What is the necessary return to reach funded? This would allow us to determine if there is a realistic solution.
Run a future value calculator like: (https://www.calculator.net/future-value-calculator.html)
with the current value in your diversified portfolio: say $1,000,000 and use the number of periods as the number of years until you are 95 with Periodic deposits set to $0. Change the Interest rate until the result matches or exceeds the future shortfall.
For the example: Current Portfolio = $1,000,000, so a 6.75% yearly return will make up the difference. Does historical data support a 6.75% return – YES. Should I worry? Depends on the RISA quadrant I’m in.

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