Can Indexing Become Too Big?
This is an issue that comes up as a last ditch effort to attempt to sway the active/passive argument in the active direction. It’s as if after a wave of articles that show the shortcomings of trying to outguess the markets an editor stands up and announces to the staff: “Folks, we need something ominous […]
Taking the Risks That Make Sense
More risk does not mean more return, but more return follows more risk. Which risks make sense for you?
Safe Withdrawal Rates for Retirement and the Trinity Study
One of the classic studies in the field of financial and retirement planning is the Trinity Study.
How Asset Location Helps Your Investments Flourish
How you invest is the largest determining factor in the level of returns you will see. But what about the “where” of investing?
Why the Dow Doesn’t Work
With Apple’s addition to the Dow (or more properly, the Dow Jones Industrial Average), now is a great opportunity to look at how to think about the Dow, and indices more broadly. Indices are great tools for understanding what is going on in the markets, but you need to understand what to do with those […]
Sequence Risk vs. Investment Risk
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.
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 […]
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 […]
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 […]
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.
