Retirement planning is individual for each client and their needs, but there are several strategies that advisors can use to help them establish a retirement income plan that works for them. In a previous article, the certainty, static, and bucket strategy were all discussed for advisors, and now we are looking to three other retirement income approaches for advisors according to an article written for Advisor Perspectives by Krisna Patel, CFA, investment advisor representative at Woodbury Financial Services.

The Variable Strategy

This is a retirement strategy that considers income needs that might change each year. An article by David Blanchett, CFA, CFP, head of retirement research at Morningstar Investment Management, found that retirees typically tend to spend the most in the early and late years of retirement, tapering in the middle. Accounting for this style of spending makes sense, as many retirees do the bulk of their consumption and large purchases in the early years of retirement, and healthcare bills eat into the later years.

A variable strategy can look a lot of different ways, but one of the more basic approaches is to plan for initial income to be higher upfront and gradually decrease over time, but also accounts for healthcare needs down the road. This approach can be challenging because retirees will acclimate to higher income and can often have difficulty moderating behaviors and habits to account for diminishing income. Following through on this type of strategy can be difficult in the later years, on top of it being very difficult to estimate what the income reduction will need to be.

See also: 3 Retirement Income Strategies for Advisors

The Dynamic Strategy

A dynamic approach is also flexible, but more so that it adjusts for changing market conditions. One of the more well-known approaches to this strategy is using the Monte Carlo simulation that analyzes thousands of different equations and scenarios to find a probability of distribution success. Clients can adjust their income according to the probabilities supplied by the Monte Carlo analysis if they fall within acceptable parameters.

The biggest challenge with this strategy is that while 100% is the desired outcome, it will rarely be that high, so retiree confidence levels matter. Determining what each individual client feels comfortable with can vary not only individually but also over time. This is also an approach that relies heavily on a clients’ willingness to adjust their spending up or down.

The Insuring Strategy

All of the strategies discussed operate on a set retirement time horizon, but without having a crystal ball to predict future market environments, duration needs are impossible to ever know for sure. Patel explains a strategy that can be employed alongside all of the others to ensure the retirement income stream.

“In this scenario, a retiree works with an insurance company to provide income over a single or joint lifetime in exchange for a lump sum. To evaluate the strategy, one must balance the comfort of receiving an income regardless of market performance or longevity against the costs. Principal accessibility, beneficiary payouts, creditworthiness, and costs are but a few factors to consider,” Patel writes.

Nationwide offers a variety of actively managed ETFs for advisors that cater to a range of investment exposures and strategies for those seeking retirement income options for their clients as part of their bigger retirement planning picture.

For more news, information, and strategy, visit the Retirement Income Channel.