CREATING AND MAINTAINING A PAYOUT-READY PORTFOLIO WITHIN AN INVESTMENT PLAN TO GENERATE A SUSTAINABLE INCOME STREAM

• US 20140249985A1
• Filed: 05/12/2014
• Published: 09/04/2014
• Est. Priority Date: 01/19/2011
• Status: Abandoned Application

• Current Assignee: Financial Engines Incorporated (Edelman Financial Engines LLC)
• Original Assignee: Financial Engines Incorporated (Edelman Financial Engines LLC)
• Inventors: Scott, Jason S., Inoue, Shinichiro, Maggioncalda, Jeffrey N., Ramirez, David, Hu, Wei-Yin, Watson, John G., Boudreau, David, Stein, Gregory, Shearer, James W.
• Application Number:
  US14/275,570
• Publication Number:
  US 20140249985A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Financial advisory methods and systems for creating a steady lifetime income stream within an investment plan is provided. According to one embodiment, a feasible, personalized pattern of periodic cash payouts from an investment plan is structured to achieve level annual income during a payout period when combined with other income sources. A mapping is maintained of fixed income investments from a limited universe of financial products available within the investment plan to corresponding constant maturity Treasury bond (CMT) weights. Based on the mapping, a payout program is designed that is expected to generate a stream of income sufficient to fund the cash payouts by determining an appropriate allocation of assets within the investment plan among the fixed income investments. A payout portfolio is formed within the investment plan including holdings in the fixed income investments in accordance with the determined appropriate allocation. The cash payouts are paid to the investor.

Claims

1. A computer-implemented method comprising:

receiving, by one or more routines running on one or more computer systems, information regarding (i) a total value of assets held in an investment plan of an investor, (ii) a payout period during which cash payouts are to be made to the investor from the investment plan, (iii) expected amounts and timing of one or more other income sources and (iv) characteristics of a plurality of financial products within a limited universe of financial products available for investment within the investment plan;

based on the information, determining, by the one or more routines, a feasible, personalized pattern of periodic cash payouts that is capable of being supported by the investment plan and that is structured to achieve substantially level annual income for the investor during the payout period when combined with the one or more other income sources;

maintaining a mapping, by the one or more routines, of a plurality of fixed income investments from the limited universe of financial products to corresponding constant maturity Treasury bond (CMT) weights;

designing, by the one or more routines, a payout program that is expected to generate a stream of income sufficient to fund the feasible, personalized pattern of periodic cash payouts by determining an appropriate allocation of a portion of the total value of the assets held within the investment plan among the plurality of fixed income investments based on the mapping;

implementing, by the one or more routines, the payout program within the investment plan by causing to be formed within the investment plan a payout portfolio including holdings in the plurality of fixed income investments in accordance with the determined appropriate allocation; and

causing, by the one or more routines, a cash payout of the feasible, personalized pattern of periodic cash payouts to be paid to the investor.

2. The method of claim 1, wherein the one or more other income sources include Social Security benefits to be received by one or both of the investor and a spouse of the investor.

3. The method of claim 1, wherein the one or more other income sources include one or more of corporate defined benefit plan distributions, an inheritance and surrender of an insurance policy having a cash value to be received by one or both of the investor and a spouse of the investor.

4. The method of claim 1, wherein said determining an appropriate allocation of a portion of the total value of the assets held within the investment plan among the plurality of fixed income investments takes into consideration optimal timing of receipt of Social Security benefits by the investor.

5. The method of claim 1, further comprising causing to be formed within the investment plan an equity exposure portfolio

6. The method of claim 5, wherein the feasible, personalized pattern of periodic cash payouts comprises a sustainable periodic cash payout that can last for the investor'"'"'s lifetime based on the investor purchasing an annuity prior to age 85.

7. The method of claim 6, further comprising reserving sufficient funds to allow the investor to purchase the annuity by establishing a longevity reserve within the investment plan.

8. The method of claim 7, wherein the payout portfolio represents approximately 65% of the total value of assets held within the investment plan, the equity exposure portfolio represents approximately 20% of the total value of assets held within the investment plan and the longevity reserve represents approximately 15% of the total value of assets held within the investment plan.

9. The method of claim 1, further comprising responsive to growth of the non-payout portfolio, notifying the investor or a representative of the investor regarding an ability to increase the feasible, personalized pattern of periodic cash payouts.

10. The method of claim 1, wherein the investment plan comprises an employer-sponsored retirement plan.

11. The method of claim 10, wherein the employer-sponsored retirement plan comprises a 401(k) plan.

12. The method of claim 1, wherein the plurality of fixed income investments include one or more Treasury Inflation-Protected Securities.

13. The method of claim 1, wherein the equity exposure portfolio involves the use of leverage on stocks or stock funds.

14. The method of claim 1, wherein the feasible, personalized pattern of periodic cash payouts accommodates financial circumstances of the investor as a result of structuring a particular pattern of periodic cash payouts tailored for the investor that is based upon one or more factors outside of the investment plan.

15. The method of claim 1, wherein the one or more factors outside of the investment plan include expecting timing of claiming Social Security benefits by one or both of the investor and a spouse of the investor, required minimum distributions, information regarding a corporate defined benefit plan, information regarding a lump sum distribution, information regarding a desired bequest or information regarding one or more other sources of income.

16. The method of claim 1, further comprising adjusting future periodic cash payouts of the feasible, personalized pattern of periodic cash payouts responsive to a request by or on behalf of the investor.

17. The method of claim 1, wherein the payout portfolio approximates risk and return properties of an ideal Treasury bond ladder.

18. A non-transitory computer-readable storage medium tangibly embodying a set of instructions, which when executed by one or more processors of one or more computer systems, cause the one or more processors to perform a method for creating flexible income, the method comprising:

receiving information regarding (i) a total value of assets held in an investment plan of an investor, (ii) a payout period during which cash payouts are to be made to the investor from the investment plan, (iii) expected amounts and timing of one or more other income sources and (iv) characteristics of a plurality of financial products within a limited universe of financial products available for investment within the investment plan;

based on the information, determining a feasible, personalized pattern of periodic cash payouts that is capable of being supported by the investment plan and that is structured to achieve substantially level annual income for the investor during the payout period when combined with the one or more other income sources;

maintaining a mapping of a plurality of fixed income investments from the limited universe of financial products to corresponding constant maturity Treasury bond (CMT) weights;

designing a payout program that is expected to generate a stream of income sufficient to fund the feasible, personalized pattern of periodic cash payouts by determining an appropriate allocation of a portion of the total value of the assets held within the investment plan among the plurality of fixed income investments based on the mapping;

implementing the payout program within the investment plan by causing to be formed within the investment plan a payout portfolio including holdings in the plurality of fixed income investments in accordance with the determined appropriate allocation; and

causing a cash payout of the feasible, personalized pattern of periodic cash payouts to be paid to the investor.

19. The non-transitory computer-readable storage medium of claim 18, wherein the one or more other income sources include Social Security benefits to be received by one or both of the investor and a spouse of the investor.

20. The non-transitory computer-readable storage medium of claim 18, wherein said one or more other income sources include one or more of corporate defined benefit plan distributions, an inheritance and surrender of an insurance policy having a cash value to be received by one or both of the investor and a spouse of the investor.

21. The non-transitory computer-readable storage medium of claim 18, wherein said determining an appropriate allocation of a portion of the total value of the assets held within the investment plan among the plurality of fixed income investments takes into consideration optimal timing of receipt of Social Security benefits by the investor.

22. The non-transitory computer-readable storage medium of claim 18, wherein the method further comprises causing to be formed within the investment plan an equity exposure portfolio

23. The non-transitory computer-readable storage medium of claim 22, wherein the feasible, personalized pattern of periodic cash payouts comprises a sustainable periodic cash payout that can last for the investor'"'"'s lifetime based on the investor purchasing an annuity prior to age 85.

24. The non-transitory computer-readable storage medium of claim 23, wherein the method further comprises reserving sufficient funds to allow the investor to purchase the annuity by establishing a longevity reserve within the investment plan.

25. The non-transitory computer-readable storage medium of claim 24, wherein the payout portfolio represents approximately 65% of the total value of assets held within the investment plan, the equity exposure portfolio represents approximately 20% of the total value of assets held within the investment plan and the longevity reserve represents approximately 15% of the total value of assets held within the investment plan.

26. The non-transitory computer-readable storage medium of claim 18, wherein the method further comprises responsive to growth of the non-payout portfolio, notifying the investor or a representative of the investor regarding an ability to increase the feasible, personalized pattern of periodic cash payouts.

27. The non-transitory computer-readable storage medium of claim 18, wherein the investment plan comprises an employer-sponsored retirement plan.

28. The non-transitory computer-readable storage medium of claim 27, wherein the employer-sponsored retirement plan comprises a 401(k) plan.

29. The non-transitory computer-readable storage medium of claim 18, wherein the plurality of fixed income investments include one or more Treasury Inflation-Protected Securities.

30. The non-transitory computer-readable storage medium of claim 18, wherein the equity exposure portfolio involves the use of leverage on stocks or stock funds.

31. The non-transitory computer-readable storage medium of claim 18, wherein the feasible, personalized pattern of periodic cash payouts accommodates financial circumstances of the investor as a result of structuring a particular pattern of periodic cash payouts tailored for the investor that is based upon one or more factors outside of the investment plan.

32. The non-transitory computer-readable storage medium of claim 18, wherein the one or more factors outside of the investment plan include expecting timing of claiming Social Security benefits by one or both of the investor and a spouse of the investor, required minimum distributions, information regarding a corporate defined benefit plan, information regarding a lump sum distribution, information regarding a desired bequest or information regarding one or more other sources of income.

33. The non-transitory computer-readable storage medium of claim 18, wherein the method further comprises adjusting future periodic cash payouts of the feasible, personalized pattern of periodic cash payouts responsive to a request by or on behalf of the investor.

34. The non-transitory computer-readable storage medium of claim 18, wherein the payout portfolio approximates risk and return properties of an ideal Treasury bond ladder.