Sequence Risk vs. Investment Risk

By Wade Pfau, Ph.D., CFA, RICP®

A lot has already been written about the sequence of returns risk confronting retirees. But the full implications of sequence risk have not been completely internalized. Retirees become more vulnerable to investment volatility, because as they withdraw from their portfolio they may find themselves locking in investment losses. It’s the opposite effect from dollar cost averaging.

To Rise or Not To Rise: Stock Allocation During Retirement

By Wade Pfau, Ph.D., CFA, RICP®

Both the February and March 2015 issues of the Journal of Financial Planning include articles which address and extend the work on rising equity glidepaths during retirement, which Michael Kitces and I published in the January 2014 issue. Admittedly, the March one…

Should I Contribute to a Roth IRA or a Traditional IRA?

By Wade Pfau, Ph.D., CFA, RICP®

At a basic level, the answer to this question relates to whether one is taxed at a higher marginal tax rate now compared to when one will be withdrawing these dollars in retirement.

Lifecycle Finance: An Alternative For A Lifetime Financial Plan

By Wade Pfau, Ph.D., CFA, RICP®

Some of the most common rules of thumb used to guide retirement planning include the following:

Retirees should be able to sustainably withdraw 4% of their retirement date assets over their retirement.

How Do I Build a TIPS Bond Ladder for Retirement Income?

By Wade Pfau, Ph.D., CFA, RICP®

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…

Why Retirees Should Choose DIAs over SPIAs

By Wade Pfau, Ph.D., CFA, RICP®

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…

Claiming Social Security at 62 or 70

By Wade Pfau, Ph.D., CFA, RICP®

A consensus in the financial planning profession is that while the Social Security claiming decision is quite difficult and there can be exceptions, it is often beneficial to delay the receipt of Social Security retirement benefits. I will provide an exploration of…

Risk and Retirement Finances

By Wade Pfau, Ph.D., CFA, RICP®

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…

Efficient Frontiers for Other Retirement Spending Goals

By Wade Pfau, Ph.D., CFA, RICP®

Efficient Frontiers for Other Retirement Spending Goals

Deciphering the Annuity Puzzle

By Wade Pfau, Ph.D., CFA, RICP®

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…

Ten Reasons Why the 4% Rule is Too Simplistic for Retirement Planning

By Wade Pfau, Ph.D., CFA, RICP®

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.

It is Optimal for Retirees to Plan for Reduced Spending with Age

By Wade Pfau, Ph.D., CFA, RICP®

A general assumption is that people plan to spend a constant inflation-adjusted amount for as long as they live. However, this spending plan is actually not optimal for any reasonable set of preferences about the tradeoff between spending now and later, even if we assume that future market returns are known in advance.