Retirement planning system and method

• US 7,840,470 B2
• Filed: 10/03/2008
• Issued: 11/23/2010
• Est. Priority Date: 01/05/2005
• Status: Active Grant

• Current Assignee: Northwestern Mutual Life Insurance Company Incorporated
• Original Assignee: Northwestern Mutual Life Insurance Company Incorporated
• Inventors: Robinson, Charles D.
• Primary Examiner(s): Colbert; Ella
• Assistant Examiner(s): Shaikh; Mohammad Z
• Application Number:
  US12/245,418
• Publication Number:
  US 20090030740A1
• Time in Patent Office: 781 Days
• Field of Search: 705 35- 42
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A computer-implemented retirement planning system comprises data collection logic, modeling logic, and report generation logic. The data collection logic is configured to receive data pertaining to an individual planning for retirement. The retirement modeling logic is configured to process the data to generate parameters of a retirement plan. The retirement plan comprises a retirement income arrangement in which the amount of inflation-adjusted retirement income (from sources other than long term care insurance and health insurance) is larger during early years of the retirement plan and decreases as the maximum life expectancy of the individual is reached. The report generation logic being configured to generate a retirement plan report describing the retirement income arrangement.

Claims

1. A computer-implemented retirement planning system, comprising:

data collection logic implemented by machine-executable instructions stored in a machine-readable storage medium and a processor that executes the instructions, the data collection logic being configured to receive data pertaining to an individual planning for retirement and to present questions configured to elicit information useable to ascertain what the individual planning for retirement considers to be a worst case scenario basic needs level of income;

retirement modeling logic implemented by the machine-executable instructions stored in the machine-readable storage medium and the processor that executes the instructions, the retirement modeling logic being configured to process the data to generate parameters of a retirement plan based on the worst case scenario basic needs level of income, the retirement plan comprising a series of phases in which the individual becomes successively less active in each phase, the retirement plan comprising a retirement income arrangement in which the amount of inflation-adjusted retirement income from sources other than long term care insurance and health insurance is larger during early years of the retirement plan and decreases as the maximum life expectancy of the individual is reached; and

report generation logic implemented by the machine-executable instructions stored in the machine-readable storage medium and the processor that executes the instructions, the report generation logic being configured to generate a retirement plan report describing the retirement income arrangement.

2. The system of claim 1, wherein the retirement plan is configured to vary the amount of inflation-adjusted retirement income provided to the individual in accordance with an estimated marginal utility of money for the individual during the retirement.

3. The system of claim 2, wherein the retirement plan report is configured to provide the individual with information describing how the amount of inflation-adjusted retirement income varies in accordance with the estimated marginal utility of money for the individual during the retirement.

4. The system of claim 1, wherein the retirement income steadily decreases towards a basic needs level as the maximum life expectancy of the individual is reached.

5. The system of claim 1, wherein the retirement plan report presents a comparison of the amount of inflation-adjusted retirement income received by the individual under the retirement plan with the amount of inflation-adjusted retirement income that would be received by the individual from the same starting retirement assets if the income were generated in an inflation-adjusted but otherwise time-invariant fashion.

6. The system of claim 1, wherein the amount of inflation-adjusted retirement income from sources other than long term care insurance and health insurance is at least two times as large during the early years of the retirement plan as compared to when the maximum life expectancy of the individual is reached.

7. The system of claim 1, wherein the amount of inflation-adjusted retirement income from sources other than long term care insurance and health insurance is at least three times as large during the early years of the retirement plan as compared to when the maximum life expectancy of the individual is reached.

8. The system of claim 1, wherein the data collection module is configured to present questions configured to elicit information concerning the individual'"'"'s tolerance for risk in connection with the prospect of receiving an amount of income which is less than the worst case scenario basic needs level as the maximum life expectancy of the individual is reached.

9. A computer-implemented retirement planning system, comprising:

report generation logic implemented by machine-executable instructions stored in a machine-readable storage medium and a processor that executes the instructions, the report generation logic being configured to generate a retirement plan report describing a retirement plan for an individual, the retirement plan comprising a series of phases in which the individual becomes successively less active in each phase, and the retirement plan report describing a retirement income arrangement for the retirement plan in which inflation-adjusted income allocated for lifestyle spending varies in accordance with an estimated marginal utility of money of the individual during retirement;

data collection logic implemented by the machine-executable instructions stored in the machine-readable storage medium and the processor that executes the instructions, the data collection logic being configured to receive data pertaining to an individual planning for retirement, the data collection logic being configured to present questions configured to elicit information concerning what level of income the individual considers to be a worst case scenario basic needs level of income and being configured to elicit information concerning the individual'"'"'s tolerance for risk in connection with the prospect that actual retirement income during a final phase of retirement may be less than the worst case scenario basic needs level of income; and

retirement modeling logic implemented by the machine-executable instructions stored in the machine-readable storage medium and the processor that executes the instructions, the retirement modeling logic being configured to process the data to generate parameters of the retirement plan, the retirement modeling logic generating the parameters of the retirement plan based on the level of income the individual considers to be a basic needs level of income and based on the individual'"'"'s tolerance for risk in connection with the prospect that the actual retirement income during the final phase of retirement will be less than the worst case scenario basic needs level of income, the retirement plan comprising a retirement income arrangement in which inflation-adjusted retirement income allocated for lifestyle spending is larger during early years of the retirement plan and decreases as the maximum life expectancy of the individual is reached.

10. The system of claim 9, wherein the retirement modeling logic is configured to generate the retirement plan by generating parameters for the final phase of retirement, and then working backwards based on the parameters for the final phase of retirement to generate additional parameters for earlier phases of retirement.

11. The system of claim 9, wherein the retirement plan report reflects a purchase of a deferred annuity.

12. The system of claim 11, wherein the deferred annuity comprises an annuitization payout option which allows the individual to exchange the value of the deferred annuity for the issuing company'"'"'s guarantee to make payments to the individual for the individual'"'"'s lifetime.

13. The system of claim 12, wherein the deferred annuity has a guaranteed minimum settlement rate, the guaranteed minimum settlement rate being an interest rate at which payments are made under the annuitization payout option, wherein, if settlement rates currently offered at the time the annuitization payout option is exercised are less than the guaranteed minimum settlement rate, the individual has the option to select the guaranteed minimum settlement rate to receive a higher payout.

14. The system of claim 10, wherein the deferred annuity has a guaranteed minimum death benefit.

15. The system of claim 9, wherein the retirement plan report reflects the purchase of long term care insurance and health insurance.

16. The system of claim 9, wherein the retirement plan report presents the series of phases to the individual as comprising an active phase, a slow down phase, and a passive phase.

17. The system of claim 9, wherein the series of phases comprise at least three phases, and wherein the retirement plan calls for spending at least 60% of retirement assets available at the beginning of the first phase during the first phase.

18. The system of claim 9, wherein the retirement plan report is configured to present the individual with income information based on an assumption that the individual receives a lifetime annuity during the last phase of the series of phases.

19. A computer-implemented retirement planning method, comprising:

receiving, by data collection logic implemented by machine-executable instructions stored in a machine-readable storage medium and a processor that executes the instructions, user inputs indicating a level of income an individual considers to be a worst case scenario basic needs level of income;

receiving, by the data collection logic, user inputs indicating the individual'"'"'s tolerance for risk in connection with the prospect that actual retirement income during a final phase of retirement may be less than the worst case scenario basic needs level of income; and

generating, by retirement modeling logic implemented by the machine-executable instructions stored in the machine-readable storage medium and the processor that executes the instructions, a retirement plan based on (1) the worst case scenario basic needs level of income and (2) the individual'"'"'s tolerance for risk in connection with the prospect that the actual retirement income during the final phase of retirement may be less than the worst case scenario basic needs level of income, wherein the retirement plan that is generated comprises a series of phases in which the individual becomes successively less active in each phase, and wherein the retirement plan that is generated comprises a retirement income arrangement in which the amount of inflation-adjusted retirement income from sources other than long term care insurance and health insurance is larger during early years of the retirement plan and decreases as the maximum life expectancy of the individual is reached.

20. The method of claim 19, wherein generating the retirement plan comprises generating parameters for the final phase of retirement, and then working backwards based on the parameters for the final phase of retirement to generate additional parameters for earlier phases of retirement.

21. The method of claim 19,

wherein the retirement plan is configured to vary the amount of inflation-adjusted retirement income provided to the individual in accordance with an estimated marginal utility of money for the individual during the retirement;

and

wherein the method further comprises generating a retirement plan report which describes the retirement plan, the retirement plan report being configured to provide the individual with information describing how the amount of inflation-adjusted retirement income varies in accordance with the estimated marginal utility of money for the individual during the retirement.

22. The method of claim 19,

wherein the retirement plan comprises a retirement income arrangement in which the amount of inflation-adjusted retirement income from sources other than long term care insurance and health insurance is at least twice as large during early years of the retirement plan as compared to the amount of inflation-adjusted income that is received as the maximum life expectancy of the individual is reached;

wherein the method further comprises generating a retirement plan report which describes the retirement plan, the retirement plan report being configured to provide the individual with information describing the decrease in the amount of inflation-adjusted retirement income throughout retirement; and

wherein the retirement plan presents a comparison of the amount of inflation-adjusted retirement income received by the individual under the retirement plan with the amount of inflation-adjusted retirement income that would be received by the individual from the same starting retirement assets if the income were generated in an inflation-adjusted but otherwise time-invariant fashion.