Maximizing Retirement Income with Steve Zuschin

Jack Sharry: Making friends so after you have joined us on WealthTech on Deck, as you’ve been hearing, wherever you turn more people are retiring every day than at any point in history. 10,000 people turn 65 Each day, and that will rise to 12,000 over the next two years, more are retiring early, and people are living longer, which means retirement savings will need to stretch further than ever. Fears of higher inflation and higher taxes being investors, retirement savings must work even harder. So no surprise clients biggest concern is how to maximize retirement income. And of course, the single biggest cost or impediment to maximizing retirement income is taxes. For our show today, I’m going to talk with my colleague, Steve Zuschin. Steve works very closely with our clients and helping them build comprehensive advice platforms, the two biggest issues we hear from firms we work with is what to do about taxes and how to maximize income. Steve is going to talk with me about an industry first. It’s a comprehensive retirement income program we just launched called LifeYield Retirement Income sourcing. Steve, good to have you back on the show.

Steve Zuschin: Thanks a lot, Jack. It’s great to be here.

Jack Sharry: So Steve, let’s start with talking about your role with our clients because you’re getting some very dirty fingernails, so to speak, around working with them and what they’re building and what they’re creating, and also what they’re expanding upon. So fill us in.

Steve Zuschin: Yeah, thanks a lot, Jack. I mean, you know, my role is unique. And as you put it, my fingernails are dirty. But you know, every time we work with a new partner at LifeYield, it’s often unchartered territory. So we’re working with a firm who’s trying to innovate, whether it’s coordinating existing systems that they have, maybe they’re trying to approach something new around introducing tax efficiency, or sometimes they’re starting from scratch. And more often than not, we end up playing a role in that innovation and trying to guide the conversation and guide some of the points. And I think LifeYield brings a unique view to those partnerships, because we often we’ve learned from our experience around how to appeal to an advisor. And when we’re building software, where we’re building new features, we definitely want to think about how an advisor will use that in conversations with their clients to differentiate themselves,

Jack Sharry: is to talk a little bit more about that, because that’s sort of unique, you really have a strong technology background, you have a strong understanding of the advisor, you spent a lot of time with, of course, your career with RIAs, talk about that, because often you’re working with technicians who are less connected to advisors, shall we say? And you’re really sort of that bridge. So how does that all work out? Because that’s really critical, because you need to have a user experience that advisors are going to embrace and incorporate into their practice.

Steve Zuschin: Absolutely. I mean that, you know, my experience, I cut my teeth in financial services with a large insurance company, I moved over to the technology sector or fintech sector, roughly 15 years ago, and was one of the first employees at a risk tech startup. And there I was, you know, I was hired to do sales. But I pretty quickly in a small startup worked very closely with our product team. And we created an environment where we had this very fast feedback loop where we were going out speaking with advisors, implementing solutions, getting feedback, in the next sprint of innovation, we would put new features out there, get that feedback, where we were really, it was very fast. And I got to work very closely with some of the best advisors in the industry, and then quickly implement that into a product and see how that resulted in their day to day conversations with their clients and new prospects. So my role here at LifeYield has been unique. And I’m working with larger firms who are developing their own proprietary platforms. And they have a lot of different moving parts. And as you mentioned, sometimes the people developing these systems, they have one goal, but that doesn’t always align with what an advisors goal is. And so when we bring our experience to the table, sometimes we can forecast out and say, hey, if we think about this from a different angle, we might get better adoption with this tool.

Jack Sharry: So one of the things to consider. And because I know this well, because I’m as actively involved as you are not with each firm. But at a strategic level. Let’s say we’re working with a lot of the folks that are making the decisions on hi, one of the things that’s critical is with all the different pieces planning and proposal and ongoing portfolio management, rebalancing, and income generation, all the stuff you have to do to create a comprehensive system, everything flows through tax. So a lot of reasons you wind up dealing with more than what is on our it says in our contract is the fact that everything flows through tax, and you really have to consider that. So when he talked a little bit about just the importance of tax and what we’re doing about it also, you start to get a tax. You’re also dealing a lot with planning when he talks about how this all comes together.

Steve Zuschin: Yeah, I mean taxes is kind of the number one offender when it comes to expenses in retirement. But it’s also a huge drag on reaching retirement goals to begin with. So, more often than not, we’re stuffing money away in savings and financial services has focused so much on, you know, finding the right product, finding the right asset allocation to manage risk for folks, planning has been really successful in establishing a more comprehensive view, but not a lot on taxes. Maybe there was a product that was tax tax efficient. And that was introduced as part of your overall allocation, but the overall strategy on how we manage taxes both to optimize or minimize unnecessary taxes, but also all the way through retirement, how we’re going to spend our money, it’s been a little bit glossed over.

Jack Sharry: You don’t just wave a magic wand, and there it is.

Steve Zuschin: No, and it’s never that easy. You know, I think if you talk to any advisor out there, they want to avoid the conversation of taxes. And part of that is liability. And the other part is they don’t want to, you know, make their CPAs that they work with so closely mad because it’s, you know, this tariff war. But every decision we make in financial services, every recommendation we make has a tax consequence, whether we want to own that or not.

Jack Sharry: Yeah. So when you talk a little bit about that, we’re talking about the life yield retirement income sourcing approach. I know a number of components, we touch a lot of elements on the existing platform, we coordinate a lot of the capabilities that exist. So we’re kind of an overlay smooth Take, take our audience through how that all works. All the all that comes together.

Steve Zuschin: Yeah, well, like I said earlier, you know, what we look at when we when we look at our partners, a big hub is financial planning. A huge investment for well over a decade now on by most firms has been on financial planning, and which has been great. It’s really I think, enabled our industry to get a better or more comprehensive view of their client, more information that seemingly it didn’t seem relevant before. Maybe over a decade ago, if you weren’t in a financial planning discussion, information about their income, their expenses, this helps us define their goals for retirement, it helps us get a better overall understanding of their family, maybe their dependents getting more information about those dependents.

Jack Sharry: And of course, what you’re talking about Steve is not just all those various elements you just described, but there’s the data, the data starts to flow from there from probably from the data aggregation capability through the plan. But when you describe that, because data is kind of fundamental to coordinating all these elements, since for a long time, it just was inconsistent.

Steve Zuschin: Yeah, I mean, in a planning system, we are starting to coordinate this data, but also when we think about the mechanics of what a financial planning tool often does, where it’s running 1000s or 10s, of 1000s of simulations to get an understanding of this one uncertainty, which is market performance, how probable or how likely are we to meet our goals? Now, with all of that data, and all these simulations going, you lose some granularity and financial planning tools need to do that in order to meet the market expectations of being able to update a plan quickly and get results. But what’s lacking there is this ability to zoom in and see the impact of really specific items that we LifeYield have focused on around taxes and the taxes that are going to end up coming out. And how that impacts our ability to meet our spending requirements, given any one of those simulations or how the market behaves.

Jack Sharry: So one of the things you may think of when you talk about the plan, the plan makes a recommendation around an asset allocation, few other things that it’s going to take a look at, but it doesn’t deal with taxes that it doesn’t really give us specific to do lists, so to speak, of generating retirement income, that’s really where we step in, is it?

Steve Zuschin: Yeah, absolutely. You know, don’t get us wrong. I think that planning tools have done a great job and exposing this conversation and and really getting advisors to adopt getting a more comprehensive view. What LifeYield does is we take that plan. So what we focused on is rather than replacing it or building a new planning system, we want to turbocharge your planning system, we want to give you the magnifying glass and allow you to look at Hey, how am I going to implement this strategy, depending on how the market ends up next year when I need to help my client top up their checking account. So what we focused on there is in integrating with these planning tools, and looking at all the data that they’ve aggregated, and all the analysis they’ve done, and allowing that to feed into the life yield overlay, or our tax efficiency overlay system, and really give that glance and do the analysis on the end depth taxes. So not just looking at an effective tax rate, but actually calculating out what type of income do you have? How will that be taxed? And how does that inform the next period when we need to make a withdrawal to meet your spending requirement. And so we have a very detailed tax calculator that’s part of our system, where we’ll take and digest all of the output from a plan through our tax calculator and give a more accurate view on the taxes or the tax liability that your client will have. We can also have additional tactics that sit as an overlay or an optional feature, they get turned on. So one of those is going to be asset location something that light field has focused on for the last 12 years. How do we optimize the asset location and distribute that allocation across the accounts the client owns We’re also going to look at other features like Roth conversions, tax harvesting, and when and how to file for Social Security. And these are just some of the optional features that can be turned on or off by the firm to analyze how that impacts the future spending ability of their clients.

Jack Sharry: So basically, what a plan does is it suggests how you should organize the accounts, at least at a massive allocation level. And where life field picks up as it looks around at the corollary asset allocation, which is asset location. In other words, how do you locate those assets? And for those who are not familiar, it’s putting more tax efficient assets in your taxable account and tax inefficient assets in your IRA or 401K or what have you. Again, that’s oversimplification, but largely, it’s about getting the right stuff in the right place. And then what you’re saying, and maybe you want to expand on this a little bit, how do we factor in? How does LifeYield work to then factor in all the other elements? So we’re looking at getting the accounts just right, and that may change over time describe that, if you would, and then also have to factor in things like social security as they get close to retirement around Roth conversion, that whether that makes sense given their tax situation? So maybe describe, because there’s a lot of alchemy we’re talking about right here is a lot of the stuff coming together. How does that all work? And I know it’s very fancy algorithms, but maybe in layman’s terms, if you could describe that,

Steve Zuschin: Yeah, well, I think it all starts at a foundation of how we coordinate, not just the investment accounts, but all the other sources of income and assets that somebody might own that they can use to meet their spending, as they retire. In a recent conversation with our product team, our head of product, Martin Cowley, he commented that, you know, in our income sourcing, there’s no date, there’s no retirement date, what we’re analyzing is just you have inflows and outflows. And so at some point, those are gonna go negative, right, where you’re spending more than you have coming in. And it’s really a matter of how do we coordinate everything to make sure that you take out as little as possible to meet all your spending requirements. And a lot of the time it boils down to taxes, and how you maximize these other assets. You know, you can have a given year where you have income from dividends or yield, where you pay a lot less in taxes. And if you have to liquidate something and realize capital gains,

Jack Sharry: Maybe describe No, we did a study with Ernst Young on our methodology, maybe describe the what they found in terms of results, because we also quantify the benefit of what we’re describing. So maybe talking about what you iPhone,

Steve Zuschin: Yeah, when running an analysis, we picked a pretty standard household that starting with a million dollars at age 50, aiming to retire at age 65. And then looking at a 25 year retirement. And when running and applying all the different tactics that LifeYield can help set up and implement. When applying that to this simulation, they found that we could decrease the taxes paid by that household by 40%. So if you flip that around on its head, it’s those clients out there actually paying 40% more in taxes than they needed to, it’s just a matter of coordinating and setting up their accounts in the appropriate way. They also found that the after tax income that that household could pull in a sustainable rate was increased by 33%. And that’s huge. I mean, you gotta talk to anybody, you look at a 33% Raise during retirement, and that opens a lot of doors for them and a lot of freedom to be able to enjoy their retirement. And then we also found that the bequest, the amount requested to the next generation for that family could be increased up to 45%. And this isn’t picking a new, you know, investment product, this isn’t taking on more risk than you’re comfortable with. This is just about coordinating the accounts in a way that you can minimize the taxes paid, and kind of squeeze more juice out of the lemon.

Jack Sharry: So Steve, I know there’s one firm that many, you know, that has embarked on this journey with us around retirement income, and they launched it not too long ago, not the full version we’re describing now. They have an earlier version. They’re working on the next, but they’ve had significant uptake. Talk a little bit about that, if you would, yeah. I mean,

Steve Zuschin: So we work with several partners around retirement income, and a lot of those partners are focusing on how to take a withdrawal right now. So how do I liquidate the assets that we have to meet a client’s spending requirement, but when we look at income sourcing, it really opens up this door to create a multi year strategy. And the uptake has been tremendous. So the feedback from the advisors within these firms has pointed directly at some of the tactics that we have the ability to turn on or off depending on the type of client situation that they’re in. So it’s not just about these things that we read about like Roth conversions, or tax loss harvesting, it also has to do with just how we select the tax lots, and having the freedom to have an advisor inform us of that or a goal that might be that hey, my client, and how they want to request their assets. Right. So sometimes a Roth conversion mathematically not might not help somebody spend more, but it is going to help them pass their assets more efficiently to the next generation. So in doing these one time withdrawals and coordinating those across accounts, it’s really opened the floodgates to advisors saying and giving feedback exactly how they want to be able to use this next to the planning that they’re doing with their clients.

Jack Sharry: And of course, harkening back to the A tidal wave of retirements that are going on currently, it’s no surprise to see that the adoption has been higher than then frankly expected, but on the part of the firm’s we work with, but also what it sets up is people do tend to consolidate assets as they get closer to retirement. And certainly, if you can demonstrate away and quantify the benefit of consolidating those assets and show how you can generate a paycheck over the course of a retirement, all that is rather attractive. So I know many firms are finding that as they have these kinds of tools, they’re seeing significant asset consolidation. So maybe comment on that, if you would?

Steve Zuschin: Yeah, I mean, I think that consolidation is, it’s a given. And the industry data shows that when people retire, they consolidate their assets with one advisor or one firm. And it’s really about putting yourself in a position to have those consolidated with you. And what we found is that our partners who are actually out there telling this story and working with their clients have had more success, consolidating assets. But you know, you made you made a comment there that it reminded me of, of a situation, I was just speaking with a client about that, you know, when you’re in that conversation with somebody, and you’re using a financial plan to communicate how you’re going to help them live through their retirement and meet their goals, you know, things change. And we see that year over year, one of the things that we focused on at LifeYield, with integrating with a planning tool is having a dynamic algorithm. So being connected with our partners like we are now to their trading systems, where when it comes time to, hey, we need to suggest some sales to meet our clients spending. And we need to top up that checking account being connected to that, but also being connected to planning, we can quickly adjust that plan to address changes in tax law to quickly address changes in tactics that we’re able to do like Roth conversions, or last year, we got a freebie on RMDs. So having an algorithm that can look across all of those things and adjust dynamically, you know, there could be Hey, Jack, you know, I know that we said that we were going to be doing Roth conversions for the next 10 years. But things have changed in this year, we’re not going to and this is why and let me show you how this impacts our plan moving forward. That’s a really powerful story and being able to start a conversation with somebody as they’re entering retirement on that

Jack Sharry: Is extremely powerful. So Steve, we’ve heard what’s going on right now we’ve heard it called the great retirement. And because a lot of people are retiring early, we’ve also heard it called the great resignation. Clearly, people are retiring in record numbers that’s in the data. And in the research that we see across the board. Maybe to summarize, because you’ve described a fairly technical not as technical as you could I might add, but at a fairly technical level, all that we do, which is a lot, but maybe to boil it down what sort of the essential story for people to try and understand that what my the advisors share with a client is they’re describing what we’re, we’ve described as an industry first, because we’ve yet to see anything at this scale, the ability to scale it is, as we’ve described, there are no others that have done that, but maybe the simple story that someone could, I guess you’d call it the elevator pitch.

Steve Zuschin: Yeah, I’d start by saying the LifeYield retirement consortium was built to be integrated with your current planning system, extend into a detailed analysis around taxes and how to reduce those taxes using various methods, and then connect into your trading systems so that the plan can actually be implemented year over year.

Jack Sharry: And along the way, you are looking at the different account types with their different taxation, you’re looking at things like social security and when to start it. You’re looking at RMDs, you’re looking at Roth conversions, you’re looking at a variety of things along the way to make sure that you’re just not paying any, any unnecessary taxes. That’s right, Steve, thanks. This has been great. And we like to keep our podcasts under 30 minutes. So as we look to wrap up, what are the three key takeaways from our discussion today?

Steve Zuschin: Yeah, if I had to nail down three, Jack, I’d start just by reiterating the fact that we have more people retiring now than ever before. And it kind of snuck up on our industry. And this is a great way to meet the industry where it’s at and help them maximize their retirement income. The second thing is that taxes are the number one expense, the largest expense that people incur when they’re in retirement, and most of them are paying unnecessary taxes. So there’s a huge opportunity to improve outcomes for them and ourselves. And then third, is LifeYield, retirement income sourcing was built to turbocharge your current existing planning system. And I think it’s really important to create that consistency. And we focused on that as creating consistency with planning to zoom in on the tax impact on retirement income, and how to minimize those taxes, period by period in a dynamic, automated and scalable way.

Jack Sharry: That’s great. So I’ll give you my summary basically is a win-win win the the client wins because they have a third more money to spend. The advisor wins because they get more assets because this is cause for your consolidation. And the firm wins something we don’t talk much about. But frankly, because of automation, compliance issues will get smaller, and assets will get bigger. So it’s a win all around. The client wins. The advisor wins the firm wins. It’s a win win. So Steve, thanks again. This has been great to catch up. Congratulations to you on the team, so many I know you’re representing here with what we’ve built. So congratulations to all for our listeners. If you’ve enjoyed our podcast, please rate review, subscribe and share what we’re doing here at well, tech on deck. We are available wherever you get your podcasts. Thanks again, Steve. It’s been a real pleasure. I look forward to the next time.

Steve Zuschin: Thanks a lot, Jack.