How Do I Build a TIPS Bond Ladder for Retirement Income?
Building bond ladders for retirement income is an important but understudied topic. Especially as we are at a point in time when many are worried about future interest rate increases, bond mutual funds will lose value as rates rise, while a bond ladder will still provide the desired income at the bond maturity dates no […]
Why Retirees Should Choose DIAs over SPIAs
My new column at Advisor Perspectives is called, “Why Retirees Should Choose DIAs over SPIAs.” In the past, I’ve written about the efficient frontier of retirement income, finding that retirees can best satisfy twin goals of preserving their lifestyle spending needs in bad luck cases and leaving the potential for upside as well through a […]
Risk and Retirement Finances
In my last blog post, I described a recent article by Paula Hogan and Rick Miller about different approaches to financial planning. I’d to come back to an issue from that article related to risk management for retirement finances. They make a clear distinction between two risk concepts: Risk tolerance: comfort in dealing with portfolio […]
Deciphering the Annuity Puzzle
My Advisor Perspectives column for July is now available. It is, “Deciphering the Annuity Puzzle: Practical Guidance for Advisors.” In this column, I explain the economic theory behind the puzzle. The puzzling issue is why people do not annuitize more of their assets at retirement since it removes longevity risk from the equation and allows […]
Ten Reasons Why the 4% Rule is Too Simplistic for Retirement Planning
What is the highest withdrawal amount as a percentage of retirement date assets that with inflation adjustments will be sustainable for the full 30 years? Here are 10 reasons that 4% may not be the appropriate withdrawal rate for every new retiree.
Understanding the Annuity Puzzle: Why Retirees Often Avoid Annuities
Economic theory suggests that retirees should protect themselves against outliving their assets by purchasing life annuities. In return for a lump sum at purchase these financial products provide a guaranteed income stream for life, effectively insuring against the risk of depleting one’s savings—a concern known as longevity risk. Despite these theoretical benefits, we observe that […]
The Shocking International Experience of the 4% Rule
The Shocking International Experience of the 4% Rule. An argument made in support of the 4% rule is that despite what I argued before, post-1926 U.S…
Are market valuations the most important factor for retirement income strategies?
The question remains as to whether historical withdrawal rates provide sufficient insight about what can reasonably be expected to work for more recent retirees.
Spending Amounts vs Spending Value
How much should you plan to spend each year in retirement? That depends in large part on your budget.
Fixed Time Horizons vs. Survival Probabilities for Retirement Planning
The planning horizon for the 4% rule is 30 years, but how long will your retirement really last?
