In the 1980s, Lubinski began working on an investment strategy that would provide secure income in the early years of retirement and shift riskier stock investments to a longer-term portfolio.
He divided clients' assets into five-year increments, and funded each with enough money and appropriate investments to provide income for that period of retirement.
The first phase of this "income for life" model focuses on guaranteed income. In a high-interest-rate environment, a ladder of certificates of deposit with staggered maturities would work well. But in today's low-interest-rate climate, a five-year immediate-payout annuity gives you more bang for the buck.
Phase two focuses on conservative income-generating investments, such as a bond ladder or a deferred annuity, that can be converted to an income annuity in years six through 10. Each subsequent phase allocates a little less money and directs it toward assets that are slightly riskier. The goal is to refill the immediate-income bucket every five years. It takes a minimum of $250,000 to implement this strategy.
In retirement, "clients are more concerned about reliability of income than about return on investment," Lubinski says. "You can't chase both at the same time."
But you can achieve both goals if you compartmentalize your money based on short-term, medium-term and long-term needs.
Now Lubinski spends much of his time training other financial advisers to use his model. And demand is growing. For a more in-depth explanation, see the Income for Life Model website, where you can also search for planners who incorporate this strategy in their practices.
A sideways pyramid
Jim Coleman, the head of Coleman Financial Advisory Group in Waterbury, Conn., has added his own twist to the income-for-life model. When describing the strategy to clients, he tells them to think of a classic risk pyramid, which puts the safest investments (such as bank accounts and money market funds) at the bottom and layers on progressively riskier investments (such as bonds and stock funds), building to a peak.
In the classic model, even if your investments are diversified, all your assets are at risk at the same time. Coleman flips the pyramid on its side so you tap the most conservative, risk-free investments at the beginning of your retirement timeline and let the riskier investments grow until the later years. Your most aggressive assets will have years -- and possibly even decades -- to grow, creating a source of stable retirement income in the future.
"With this divide-and-conquer strategy, you can have the best of both worlds," Coleman says.
This article was reported by Mary Beth Franklin for Kiplinger's Personal Finance magazine.
