Modern Retirement Theory
Modern Retirement Theory (MRT) is a comprehensive retirement planning process created by Jason K. Branning, CFP®, RICP® and M. Ray Grubbs, Ph.D to offer customized solutions for each individual retiree. The goal of this proprietary process is a retirement plan that is secure, stable, and sustainable for the retiree’s lifetime.
At Branning Wealth Management, we believe that retirement should be considered an absolute goal, rather than a relative one. Pre-retirees seek to retire and stay retired. By prioritizing retirement goals in the planning process, funds can be established to offset retirement risks.
We utilize this model to help our clients achieve their desired results. By revolving our Retirement Planning practice around MRT, we prioritize goals around the “unknown” – market declines, health events, etc. while also gaining a complete understanding of the “Core 4” foundations: Base Fund, Contingency Fund, Discretionary Fund, Legacy Fund.
The MRT Model encompasses the following premises to build a retirement plan:
Retirement is an absolute goal, not a relative one.
Planning and executing retirement funding should focus on individuals rather than historical data or group statistics.
MRT acknowledges that future events are always unknowable to individuals.
MRT seeks to provide retirement funding that is simultaneously secure, stable and sustainable. This model is also called the 3-S Income.
Retirement Sheet represents assets or cash flow items that will affect the retiree. Retirement funding should consider how best to utilize an individual’s entire balance sheet, not just his or her portfolio, as well as off balance sheet items like Social Security and pensions.
A hierarchical priority of retirement funding can be established to offset retirement risk.
Aligning Income and Expenses
The MRT process also strives to match Base Expenses with Base Income. Base Income should be stable, secure, and sustainable throughout the retirement horizon. We help our clients build their Base Fund through the following steps:
- Determine Monthly Retirement Expenses.
- Determine Social Security timing & strategy.
- Match Base Expenses against Base Income & determine income deficit.
- Cover deficit by converting assets (IRAs, 401ks, Investment Accounts, etc.) into income producing holdings. Remaining Base Income should be created using bond ladders, annuities (SPIAs, DIAs) or potentially other contractually guaranteed options.
- Calculate the Critical Path®.
Match Goals with Cash Flows
We want to create a comprehensive financial plan that determines the optimal strategy to match the timing of your future financial goals with the best use of your investments and other resources.
Allocate Bonds and Stocks by Income Need
We invest in bonds for the most vulnerable period of retirement to sequence of returns risk. Once your income is in place, we invest in stocks for the longer term in countries across the world to take advantage of growth opportunities.
Certain asset classes and styles (stocks, growth/value, bonds, real estate, international, emerging markets, commodities) work better over different time horizons. Based on your plan, we will tilt stock holdings to those styles that work best.
The Critical Path® is a decision-making framework and reporting system that intuitively reflects the progress that an investor’s portfolio is making towards a specific goal or their projected lifetime spending needs.
We are here to monitor and guide future decisions throughout your plan horizon.