Phillips 66 Employees: Retirement Legislation Awaits Further Action

For Phillips 66 employees, understanding the impact of financial decisions through detailed cash flow planning is critical to retirement planning - achieving goals while optimizing tax implications and withdrawal strategies - Kevin Landis, representative of the retirement group, a division of Wealth Enhancement Group.

'Cash flow planning provides a road map for managing spending, saving and retirement so that employees know when to retire and how to spend their retirement years wisely' - Paul Bergeron, of the retirement group, a division of Wealth Enhancement Group.

In this article we will discuss:

• 1. Role of cash flow planning in helping Phillips 66 clients manage spending, saving and goal funding.

• 2. How cash flow planning tools help you decide when to take your retirement & how to manage your assets post-retirement.

• 3. Benefits of account aggregation & real-time data for creating accurate financial plans.

Modeling goals and expense funding for each year of a Phillips 66 client's projected lifetime reveals how chronological and priority goal funding affects multiple client goals. The biggest decision clients face in their Phillips 66 retirement is whether to retire from Phillips 66 this year or next year. Showing how asset allocation changes due to withdrawals - and the tax implications of those withdrawals - our advisors can better assess client outcomes year over year and help clients decide when to retire from Phillips 66.

Clients can understand where their money went and where it will go to fund their life goals with cash flow planning. At any life stage, this type of planning can be used - early accumulators, mid-career accumulators, pre-retirees and Phillips 66 retirees. Early Adopters' cash flow planning can help Early Adopters understand spending, saving and funding of emergency and Phillips 66 retirement accounts. Starting cash flow planning should involve proper savings for early accumulators. But good planning also involves getting the client's financial house in order and getting the proceeds invested in a solid, diversified portfolio, says financial planner Michael Kitces.

Pre-and post-retirement pre-retirees from Phillips 66 could use cash flow planning to illustrate how current spending translates to retirement spending and how current spending impacts funding all of their goals. Phillips 66 retirees could apply cash flow planning to understand how spending affects distribution of income to fund goals and outlive retirement savings. And third-best use of our cash flow tool - decide whether Phillips 66 employees should leave Phillips 66 this year or next year. Cash flow planning can keep our Phillips 66 clients on the right financial path by integrating income & expenses, investment performance, education funding, insurance and estate planning.

Cash flow planning can also help our Phillips 66 clients understand where they lose money unnecessarily. Fees, miscalculations, wrong insurance, penalties and other charges can really add up quickly for many families. They lose on average USD 200 a month. The holistic view that cash flow planning offers means that advisors have points to discuss with clients during planning. Advisors then can analyze data better and make recommendations in the client's best interest. Gamma is a Morningstar research metric that measures how sound financial planning in five areas - asset allocation, withdrawal strategy, guaranteed income products, tax-efficient allocation and portfolio optimization - can deliver 29% more income on average to a retiree.

In addition to this value, Morningstar Research estimates that a retiree could realize 22.6% more certainty equivalent income with a Gamma-efficient retirement income strategy than in our base case. A few output options and tools are provided by our advisors via software. They range from an annual cash flow report with simulations of inflows, outflows and total portfolio assets to an interactive tool called Decision Center that allows the advisor to model recommendations live during a review meeting. Several key data points are applied to project a client's cash flow simulation.

Projections include living expenses, liability payments, insurance premiums, gifting, taxes, etc. Planned savings are also called an outflow if employee contributions to a qualified account, HSA or taxable investment are made by the employee. Total outflows minus total inflows gives a net cash flow number that is positive or negative. All liquid investments like taxable accounts, tax deferred, cash, etc. will be shown as total portfolio assets at the end of the year. Some factors that affect the ending total portfolio assets year over year are the growth rates for each account and the ending net cash flow.

Simulation uses client inflows such as income, investment distributions, planned distributions and other inflows. And if the client has negative net cash flow, that deficit will have to be financed from available portfolio assets through liquidation. With a positive net cash flow, the surplus will be deposited into the client's core cash account. The core cash account is a hypothetical wallet which measures the inflows and outflows of the client. Advisors may not save excess cash at the end of the year if a client prefers. An expense number can help advisors start cash flow planning conversations with Phillips 66 clients. Conversations about spending can be difficult if there are problems that should be addressed.

A budgeting solution is a good starting point for discussion of client spending and impact on cash flow plan. With budgeting tools, we provide daily updates on a client's spending transactions through connections to their financial institutions. This tool budgets the client's spending so that the advisor has an accurate picture of the spending which can be used for cash flow simulation and where improvements could be made. Also for Phillips 66 employees to remember: entering data - especially expenses - does not have to be time-consuming or too finely detailed in cash flow planning.

Your advisor and the software give you a lot of flexibility when entering expenses - from an annualized rollup of all expenses to major expense buckets (discretionary, etc.) and the ability to fill out a digital expense worksheet or classify transactions on the Phillips 66 client site to determine a client's true expenses for the year. Data entry takes time depending on how detailed you need it. Account aggregation is changing financial planning because it allows advisors to plan with their clients. In cash flow planning, aggregation provides an account balance with real-time information that improves a client's cash flow projection.

Using account aggregation, we connect with thousands of institutions to collect client account information like balances, holdings, asset allocations and more. By including accounts held away, aggregation makes the cash flow plan comprehensive. From this information, the advisor also understands how an account accumulates for projection purposes. This helps the advisor make recommendations that better meet the client's needs. These provide fully integrated account consolidation (assets under management) and account aggregation (assets held away) functionality across the advisor and client experiences. More than USD 2 trillion of assets are connected via the platform.

All linked accounts update values across the system - including financial plans - every day. We use a commercial aggregator - where more than 90 percent of this aggregation work is done in-house by the team with a small percentage coming from third parties. A nationwide group of financial advisors known as the Retirement group. We only plan for and design retirement portfolios for transitioning corporate employees. And each representative of the group has been hand-picked by the retirement group in select cities throughout the United States.

Each advisor was screened for pension expertise, financial planning experience and portfolio construction knowledge. TRG believes in teamwork to find solutions to our clients' problems. A conservative investment philosophy guides the team in constructing client portfolios with laddered bonds / CDs / mutual funds / ETFs / annuities / stocks and other investments. They handle retirement / pensions / tax / asset allocation / estate / elder care issues.

This document uses different research tools and techniques. All attempts to estimate future results involve assumptions and judgments and are therefore only tentative estimates. The law, investment climate, interest rates and personal circumstances will all change and will affect how accurate our estimations are and how appropriate our recommendations are. Such a plan requires ongoing change sensitivities as well as constant re-examination and alteration of the plan. So update your plan a few months before your expected retirement date and do an annual review.

Nothing contained herein shall be construed as an attempt by the Retirement Group, LLC or any of its employees to practice law or accounting. We look forward to speaking with any tax and/or legal professionals you may select regarding the implications of our recommendations. Through your retirement years, we will continue to update you on issues affecting your retirement via our complimentary and proprietary newsletters, workshops & periodic updates. Or call us at (800) 900-5867.

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Sources:

1. National Institute on Retirement Security (NIRS). 'Retirement Insecurity 2021.'
National Institute on Retirement Security , Feb. 2021,  www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf .

2. U.S. Congress. 'H.R. 2954 - Securing a Strong Retirement Act of 2022.'
Congress.gov , 2022,  www.congress.gov/bill/117th-congress/house-bill/2954/text .

3. Groom Law Group. 'Summary of Provisions in the Securing a Strong Retirement Act (H.R. 2954).'
Groom Law Group , 2022,  www.groom.com/resources/summary-of-provisions-in-the-securing-a-strong-retirement-act-h-r-2954/ .

4. Börsch-Supan, Axel, and Courtney Coile. 'Social Security and Retirement around the World.'
National Bureau of Economic Research , 2023,  www.nber.org/brd/20234/social-security-and-retirement-around-world .

5. National Academy of Social Insurance. 'Social Security and Retirement around the World.'
National Academy of Social Insurance , Dec. 2019,  www.nasi.org/research/social-security-archive/ .