Answers to Questions about LifeYield Retirement Income Sourcing

LifeYield is now making its most universal API (application programming interface) available to enterprise firms building comprehensive advice platforms.

LifeYield Retirement Income Sourcing allows firms to address the pressing need (presented by 10,000 to 12,000 people turning 65 daily) for dynamic, personalized plans for decumulating their assets tax-efficiently.

This creates more retirement income and financial security for clients as they approach retirement and provides a clear path for firms to show the benefits of consolidating assets.

Here are the questions that firms and advisors have about Retirement Income Sourcing and its relevance to them as they grapple with today’s retirement wave, the needs of future retirees, and how to convince clients to consolidate assets with them.

Why did LifeYield develop Retirement Income Sourcing for financial firms?

How much money investors will have for retirement depends on the cost of their holdings, the risk inherent to their investments, and income and investment taxes. Of these – cost, risk, and taxes – taxes have the most significant effect on what’s available for retirement.

LifeYield addresses the outsized effect of taxes on investor wealth through its battle-tested algorithms used by the leading financial firms. LifeYield technology, accessible through a modern set of APIs, provides investors with better returns by minimizing taxes and coordinating the management of all accounts in a household with:

• Multiple taxable (brokerage) and tax-advantaged accounts, such as 401(k)s, individual retirement accounts (IRAs), and Roth accounts.
• Other assets such as real estate, annuities, and life insurance.
• Social Security benefits.
• Other income sources such as salaries or wages, pensions, and annuities.

Retirees are in a significant life transition: from accumulating and saving assets to decumulating and spending their savings.

Financial advisors are being flooded with calls from people who need help converting their jumbled assets into reliable income streams that will last them through retirement. They have questions about how required minimum distributions (RMDs) work. They want to know if Roth conversions would be a smart move.

While some advisors are good at making sense of this and giving valuable advice, most don’t have the time it takes to figure out the most efficient withdrawals. And few can scale this knowledge into repeatable steps they can use across their client base.

Firms are racing to create comprehensive advice platforms that will lead to a win-win:

• For clients, by producing better outcomes over their lifetimes, and
• For advisors, by handing them the tools needed to persuade clients to consolidate assets with their firms.

LifeYield Retirement Income Sourcing will give firms and advisors a significant advantage in the marketplace.

Why should financial firms choose LifeYield as their partner in solutions for retirement income?

LifeYield Retirement Income Sourcing is the realization of years of work helping financial firms improve investor outcomes and achieve their own goals for higher AUM (assets under management) and improved advisor performance.

The next logical step was to bring together all the features LifeYield has mastered – including asset location, Social Security optimization, and dynamic multi-account withdrawals.

The latest API, Retirement Income Sourcing, capitalizes on our:

• Expertise, grounded in years of research, in tax efficiency and Social Security applications for the financial services industry.
• Capacity for navigating advisors through the dynamics of retirement decumulation planning and execution to produce more income for retirees.
• Experience in helping financial firms acquire more AUM and sell income-producing products by showing the effect on the client portfolio in dollars and cents.

The methodology behind LifeYield tax-efficiency APIs has been vetted and affirmed by consulting firm EY (download the study here). Their evaluation confirmed that firms and advisors who work with LifeYield could produce up to:

• 33% more retirement income for investors
• 40% decrease in their overall tax burden
• 45% increase in bequests

…when applied to a household with $1 million in assets at age 50 with plans to retire at 65.

Imagine results like these applied across your firm’s entire client base – and how they could impact your bottom line.

What gaps in wealth management, including a decumulation strategy, does LifeYield Retirement Income Sourcing fill?

Financial planning is the foundation of lasting and rewarding client/advisor relationships in wealth management. Today, firms pivot with ease from planning to proposing investments that meet client goals and risk tolerance.

The next step is planning how to convert assets, holdings, and Social Security into income streams. It’s a process commonly called decumulation. And that’s where advisors can get lost in the maze of accounts, products, other holdings, tax laws, RMDs, and Social Security regulations. And they can hit a wall.

Some may think, “Retirement income is part of financial planning. There are already plenty of solutions to help. What is LifeYield doing differently?”

We understand that a comprehensive financial plan can provide the groundwork for a decumulation strategy. But we saw that firms need an overlay solution to implement that strategy. They don’t want to rip and replace their current technology or override the work done in the planning process, as many solutions require.

LifeYield has expertise in integrating as an overlay technology with firms’ trading systems to execute personalized, tax-aware trading strategies on a client-by-client basis. So, we pointed our experience and prowess towards financial planning as the next significant opportunity in wealth technology.

LifeYield Retirement Income Sourcing builds on the financial plans that firms produce for clients to highlight specific actions that, if taken, can help clients reach their goals more efficiently.

But don’t advisors already know how to draw down on a portfolio to deliver income from assets to their clients?

In the past (and even today), advisors estimated how long a client household’s assets would last after they finished working. Advisors used “rules of thumb” for sequencing withdrawals of assets and/or making point-in-time decisions for withdrawals when clients called. There was little personalization or customization or long-term planning.

What advisors couldn’t – and didn’t – account for were the domino effects withdrawals produced in both taxes owed and drift from a client’s risk profile. These are significant.

Let’s compare this situation to baking a cake. In the financial planning process, the advisor and client collect all the ingredients and tools and preheat the oven. But to pull a perfect cake from the oven, they must:

• Follow the recipe’s instructions for measuring and mixing ingredients.
• Adjust the oven racks and the temperature for altitude or a convection setting.
• Time the baking period, so the confection is neither underbaked nor blackened around the edges.

Skipping steps or taking unadvised shortcuts could mean they have to throw the whole mess into the trash.

When assisting clients through retirement, we can’t rely on hunches or outdated rules of thumb. Advisors earn their stripes by providing personalized, simple, actionable instructions and demonstrating why the indicated path is the best in each situation.

There are new retirement income software products on the market. How does LifeYield Retirement Income Sourcing stack up?

Lately, some firms have launched retirement income software that accounts for tax efficiency and longevity scenarios. It does, but with limitations that should make financial firms take a second look:

LifeYield defines the range of options for investors at every decision point. Those outputs include details on tax implications and look forward to subsequent years to describe how a move today will affect income in the future.

In other words, LifeYield Retirement Income Sourcing will show how to:

• Take withdrawals (including RMDs) today and minimize the taxes from those withdrawals or trades.
• Drawdown assets for income in future years – also in the most tax-efficient way possible.
• File for Social Security benefits for optimal income.
• Evaluate and time product purchases (like annuities), investments, Roth conversions, or trades (down to tax-lot level).

Can you explain that again?

A comparison might be helpful. Remember the early GPS (global positioning systems) your car had in the 1990s? Or MapQuest, one of the first computer applications for driving directions?

They gave you step-by-step directions for the roads to take and turns to get you from where you started to your destination. We could finally throw out the stack of road maps that cluttered our glove compartments.

Think of the navigation systems you use today, like Google Maps, Waze, or Apple Maps. Those systems beam real-time information to your smartphone or dashboard that will affect your trip and give you options that account for changing conditions:

• Traffic flow
• Weather conditions
• Accidents
• Road work
• Highway police sightings

…and your decision to divert from the mapped path because you want to make a pit stop or enjoy the scenery.

LifeYield Retirement Income Sourcing is an advanced GPS for retirement income. It updates with changing conditions like:

• Tax laws and distribution rules
• Social Security rules
• Market conditions
• Life changes, like disability, needs of family members, death
• And more

So, an advisor can re-route the retirement income journey continuously.

What inputs (information) will an advisor need when using a system that incorporates the LifeYield Retirement Income Sourcing API?

That is one of the distinct advantages of the LifeYield API: It works with all the information that a firm has already populated from each client or household in its planning and account management systems:

• Brokerage accounts: individual stocks and bonds, separately managed accounts (SMAs), unified managed accounts (UMAs), mutual funds, exchange-traded funds, real estate investment trusts (REITs), cryptocurrency, etc.
• Tax-advantaged accounts: IRAs, defined contribution plans like 401(k)s and 403(b)s, Roth accounts, and health savings accounts (HSAs).
• Savings and cash
• Income sources: Real estate, annuities or life insurance, Social Security, etc.
• Spending: Essential (food, housing, clothing, healthcare) and discretionary spending (vacations, gifts, etc.) that the client has laid out to the advisor

In other words, integrating with LifeYield helps advisors start income planning with the most time – and resource-consuming steps already done. They capitalize on the power of financial planning to move their clients with ease into retirement.

Can LifeYield Retirement Income Sourcing account for assets not under an advisor’s or firm’s management?

Yes, it can. And this is a pronounced advantage for the advisor and firm that wrestle with this situation today: Their clients have multiple accounts, holdings, and products held away from the advisory firm. Think of the almost forgotten 401(k)s, the second home rented seasonally, or the nearly forgotten rainy day fund earning little interest.

Indeed, casting the lasso of retirement income planning around a household’s entire portfolio and supporting household members in optimizing Social Security benefits can help highlight the benefits of consolidating assets with one firm and one advisor.

Why should a firm select LifeYield Retirement Income Sourcing over another option for retirement income?

LifeYield is the leader in tax-efficient software available via API for financial services. Its API solutions for tax harvesting, asset location, multi-account rebalancing, and tax-smart withdrawals have been adopted by leading financial services.

LifeYield has years of experience integrating with firms’ proprietary systems and developing comprehensive advice platforms. Every implementation is customized to meet the customer firm’s needs and timelines.

Because LifeYield APIs don’t demand the construction of new databases and data sources, LifeYield can help firms move through planning and development more quickly than any other.

Every advisor and firm has suffered the shortcomings of single sign-on integrations, and one-way data flow between systems. LifeYield eliminates all of those.

And most importantly, LifeYield understands the goals of our customers: Growing their business through product development, sales, and scaling advisory activities to serve more clients with larger asset bases. We design our technology to fit our clients’ unique circumstances and tech stacks.

Contact us to learn more about how we can help bring your strategy together for fluid, customized, personalized retirement income planning.