RETIREMENT PLANNING METHOD

• US 20140143175A1
• Filed: 11/07/2013
• Published: 05/22/2014
• Est. Priority Date: 11/09/2012
• Status: Active Grant

• Current Assignee: Russellinvestments (Russell Investment Management LLC)
• Original Assignee: Frank Russell Company
• Inventors: Fan, Yuan-An, Greenshields, Rod Steven, Gardner, Grant Walter, Pittman, Samuel David, Murray, Steven M.
• Granted Patent: US 10,223,749 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Retirement planning methods and systems for use with an individual investor having a retirement plan comprising assets and future liabilities. One or more computing devices perform the methods. Embodiments of the methods include determining a net present value of the assets and a net present value of the future liabilities. A funded ratio is calculated as a function of the net present value of the assets and the net present value of the future liabilities. If the funded ratio is less than a predetermined threshold value, the retirement plan is at risk of being underfunded. If the funded ratio is greater than the predetermined threshold value, the retirement plan is not at risk of being underfunded. An indication may be displayed indicating whether the retirement plan is at risk of being underfunded.

Claims

1. A computer implemented method for use with an individual investor having a retirement plan comprising assets and future liabilities, the method being performed by one or more computing devices, the method comprising:

determining a net present value of the assets;

determining a net present value of the future liabilities;

calculating a funded ratio as a function of the net present value of the assets and the net present value of the future liabilities;

if the funded ratio is less than a predetermined threshold value, indicating the retirement plan is at risk of being underfunded; and

if the funded ratio is greater than the predetermined threshold value, indicating the retirement plan is not at risk of being underfunded.

2. The method of claim 1, further comprising:

receiving modifications to the retirement plan, the modifications modifying at least one of the assets or the future liabilities; and

repeating the method of claim 1 for the modified retirement plan.

3. The method of claim 1, further comprising:

receiving selections of a first investment strategy and a second investment strategy;

determining a first future value of the assets at a future date, the first future value being a projected value of the assets if invested according to the first investment strategy;

determining a second future value of the assets at the future date, the second future value being a projected value of the assets if invested according to the second investment strategy;

determining a threshold value based at least in part on the future liabilities; and

generating a display that displays the first future value, the second future value, and the threshold value.

4. The method of claim 3, wherein the threshold value is a projected market price for an annuity to be purchased at the future date, the annuity being sufficient to pay a portion of the future liabilities occurring after the future date.

5. The method of claim 3, wherein the threshold value is a projected actuarial net future value on the future date of a portion of the future liabilities occurring after the future date.

6. The method of claim 3, further comprising:

receiving a selection of one of the first and second investment strategies, the selected investment strategy comprising at least one asset allocation; and

generating a display that displays the at least one asset allocation of the selected investment strategy.

7. The method of claim 3 for use with the assets comprising an investment portfolio, further comprising:

receiving a selection of one of the first and second investment strategies, the selected investment strategy comprising an asset allocation; and

implementing the selected investment strategy by modifying the investment portfolio to match the asset allocation.

8. The method of claim 3, wherein the first investment strategy comprises an asset allocation determined based at least in part on the funded ratio.

9. The method of claim 8, wherein the first investment strategy allocates a first portion of the assets to growth assets if the funded ratio is less than a first threshold value, and a second portion of the assets to growth assets if the funded ratio is greater than a second threshold value, the second threshold value being larger than the first threshold value, and the second portion of the assets being larger than the first portion of the assets.

10. The method of claim 9, wherein the first investment strategy allocates a third portion of the assets to growth assets if the funded ratio is greater than the first threshold value, and less than the second threshold value, the third portion of the assets being less than the second portion of the assets, and larger than the first portion of the assets.

11. The method of claim 3 for use with the investor having an age, wherein the first investment strategy comprises an asset allocation determined based at least in part on the investor'"'"'s age, and a withdrawal rate for a period, the withdrawal rate being determined at least in part based on the net present value of the assets and a portion of the future liabilities occurring during the period.

12. The method of claim 11 for use with a set of wealth tables associating a plurality of withdrawal rates and investor ages with asset allocations, wherein the asset allocation of the first investment strategy for the period is determined by looking up the investor'"'"'s age and the withdrawal rate in the set of wealth tables, and using, as the asset allocation of the first investment strategy, an asset allocation associated with the investor'"'"'s age and the withdrawal rate in the set of wealth table.

13. The method of claim 1, wherein the predetermined threshold value is greater than or equal to one.

14. The method of claim 1, further comprising:

when the funded ratio is less than the predetermined threshold value, determining whether the funded ratio is less than a predetermined significant risk threshold value, the predetermined significant risk threshold value being less than the predetermined threshold value; and

if the funded ratio is less than the predetermined significant risk threshold value, indicating the retirement plan is at significant risk of being underfunded.

15. The method of claim 14, wherein the predetermined significant risk threshold value is less than or equal to one.

16. The method of claim 1, wherein the funded ratio is calculated by dividing the net present value of the assets by the net present value of the future liabilities.

17. The method of claim 1 for use with the assets comprising a plurality of financial assets, wherein the net present value of the assets is determined by determining a net present value of each of the plurality of financial assets to obtain a plurality of net present values for the financial assets, and totaling the plurality of net present values determined for the financial assets to obtain a total net present value of the financial assets.

18. The method of claim 17 for use with the assets comprising human capital, wherein the net present value of the assets is determined by determining a net present value of the human capital, and adding the net present value of the human capital to the total net present value of the financial assets.

19. The method of claim 18 for use with the human capital comprising future retirement contributions, wherein the net present value of the human capital is determined by totaling the future retirement contributions discounted at an appropriate interest rate.

20. The method of claim 1, wherein the net present value of the future liabilities is a market price for an annuity with payouts sufficient to pay the future liabilities.

21. The method of claim 1, wherein the net present value of the future liabilities is an actuarial net present value of the future liabilities.

22. A system for use with a plurality of client computing devices, the system being configured to implement a retirement lifestyle planner application, the system comprising at least one server computing device connected to the plurality of client computing devices by a network, the at least one server computing device being configured to:

receive a first request from a requesting one of the plurality of client computing devices,

transmit an input interface to the requesting client computing device in response to the first request, the input interface being configured to receive information identifying an investor'"'"'s assets and future liabilities;

receive, from the requesting client computing device, the information identifying the investor'"'"'s assets and future liabilities entered into the input interface,

determine a net present value of the investor'"'"'s assets,

determine a net present value of the investor'"'"'s future liabilities,

calculate a funded ratio as a function of the net present values of the investor'"'"'s assets and future liabilities, and

transmit a results interface to the requesting client computing device, the results interface indicating whether the investor'"'"'s assets are likely to be adequate to pay the investor'"'"'s future liabilities based on the funded ratio.

23. The system of claim 22 for use with the requesting client computing device being operated by a user, wherein the at least one server computing device is further configured to:

receive an indication from the requesting client computing device that the user would like to adjust at least one of the investor'"'"'s assets and the investor'"'"'s future liabilities,

transmit an adjustment interface to the requesting client computing device in response to the indication, the adjustment interface being configured to receive new information modifying at least one of the investor'"'"'s assets and the investor'"'"'s future liabilities,

if the new information modified the investor'"'"'s assets, determine a new net present value of the investor'"'"'s assets, and replace the net present value of the investor'"'"'s assets with the new net present value of the investor'"'"'s assets.

if the new information modified the investor'"'"'s future liabilities, determine a new net present value of the investor'"'"'s future liabilities, and replace the net present value of the investor'"'"'s future liabilities with the new net present value of the investor'"'"'s future liabilities,

calculate a new funded ratio as a function of the net present values of the investor'"'"'s assets and future liabilities, and

transmit a new results interface to the requesting client computing device, the new results interface indicating whether the investor'"'"'s assets are likely to be adequate to pay the investor'"'"'s future liabilities based on the new funded ratio.

24. The system of claim 22 for use with the requesting client computing device being operated by a user, wherein the at least one server computing device is further configured to:

receive an indication from the requesting client computing device that the user would like to evaluate one or more investment strategies,

transmit an investment strategy interface to the requesting client computing device in response to the indication, the investment strategy interface being configured to receive information identifying one or more investment strategies,

determine, for each of the one or more investment strategies identified in the investment strategy interface, determine a future value of the investor'"'"'s assets on a future date, and a future threshold value, the future threshold value being determined at least in part on a portion of the investor'"'"'s future liabilities due after the future date, and

transmit an investment results interface to the requesting client computing device, the investment results interface displaying the future value of the investor'"'"'s assets for each of the one or more investment strategies identified in the investment strategy interface and the future threshold value.

25. One or more computer-readable media comprising instructions executable by one or more processors, when executed by the one or more processors, the instructions causing the one or more processors to perform a method comprising:

receiving information identifying one or more assets and one or more future liabilities, the one or more assets and one or more future liabilities being components of a retirement plan of an individual investor;

determining a net present value of the one or more assets;

determining a net present value of the one or more future liabilities;

calculating a funded ratio as a function of the net present value of the one or more assets and the net present value of the future liabilities;

if the funded ratio is less than a predetermined threshold value, indicating the retirement plan is at risk of being underfunded; and

if the funded ratio is greater than the predetermined threshold value, indicating the retirement plan is not at risk of being underfunded.