Technology is solving the retirement wealth decumulation challenge

Every retiree deserves access to the life they’ve worked so hard for their entire adult lives, but poor financial planning often means that they fall short. Now, advances in technology are finally enabling them to plan for the retirement that they want by automating a critical part of financial planning: wealth decumulation.

The Baby Boomer retirement tsunami is washing over us: By 2035, adults 65 years old or more will outnumber children. Unfortunately, many retirees are entering this new phase of their lives unsure about their financial future with no guidance on how to plan for it: Only one-third of retirees say they are very confident that they have enough for a comfortable life, according to the 2018 Retirement Confidence Study from the Employee Benefit Research Institute.

Meanwhile, average life expectancy inches ever-upwards. The U.S. Social Security Administration says that 65-year-old men today can expect to live until nearly 85 on average, with women reaching nearly 87. With that in mind, people retiring around age 62 — the median retirement age in the U.S. — must plan to avoid prematurely exhausting or depleting their retirement funds.

IBM has been working on technology that will help financial service providers deliver a financially secure future to a large base of traditionally underserved middle-class retirees, so they can get the most out of their savings and enjoy retirement to the fullest.

An uncertain future

Many retirees are concerned about their financial sustainability during retirement — and rightfully so. According to a study by Schroders, there is a large gap between the income level retirees expect to receive in their golden years and the amount they actually collect. And less than half of respondents to the Retirement Confidence Study said they were confident social security benefits would stay the same or grow.

With high costs and low confidence in the social safety net, retirees are understandably apprehensive. Retirees could do far more with their assets if they only had proper guidance on what’s known as wealth decumulation — the art of investing their retirement savings wisely to ensure a healthy, long-term income.

An underserved demographic

Middle-class Americans with over $1 million in assets are well-served by fee-based financial advisors, who are happy to guide them along this path. However, middle-class Americans with between $250,000 and $1 million in retirement savings are generally underserved. Fee-based advisors typically forego taking them as clients, while the rest of the financial services industry has little interest in client engagements that reduce assets under management.


Robo-advisors have already unlocked billions in value in the wealth accumulation market, serving millennial users who were similarly left out in the cold. However, there has not been an equivalent automated service for wealth decumulated for the middle class — that is, until now.

IBM has been working on an experience-driven solution called the Robo-Digital Wealth Decumulation Advisor to help better serve this promising market of middle-class retirees.

Automating advice

The Robo-Digital Wealth Decumulation Advisor will benefit financial services firms from banks and credit unions to life and annuity insurers. It can be provided as an education tool using a simplified version, or as a full-fledged robo-advisor offering self-service financial portfolio construction. It can also help human advisors make their own work more efficient, allowing them to charge lower fees.

Companies ranging from financial services firms (such as insurers, banks and credit unions) to employee services providers and retiree organizations can benefit from the Robo-Digital Wealth Decumulation Advisor. It can help them drive sales leads for products like annuity or generate fees, not to mention improve customer experience and retention. Financial advisors can also use the tool as a valuable asset to help lower the cost of planning and servicing the millions of middle-class retirees across the U.S. and beyond.

The Robo-Digital Wealth Decumulation Advisor walks clients through several steps:

  • Retirement experience planning:Retirees explain the retirement they want, outlining experiences such as trips around the world.
  • Current finance review: Retirees take stock of their current financial situation, examining wealth and expenditures.
  • Budget creation: The robo-advisor builds a minimum budget to help retirees attain the retirement experience that they would like to have.
  • De-risking: The automated advisor guides the retiree through retirement risks, such as long-term health care.
  • Portfolio creation: The advisor automatically recommends decumulation portfolios aligned with the retirement plan, including factors like lifetime income, social security maximization, legacy goal, income volatility and more.
  • Execution and maintenance: Finally, the retiree executes the necessary financial transactions to build the portfolio, with help from a human advisor.

Thanks to these advances in technology, financial firms can cost-effectively serve a segment of the population that dearly needs guidance as it enters retirement. The Robo-Digital Wealth Decumulation Advisor represents a force for social good, bringing financial peace of mind to middle-class retirees while also presenting a viable business model for financial services firms

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