Longevity Risk
Reverse Engineering To Desired Retirement Time Horizons
This article is part of a series; click here to read Part 1. Using the portfolio return and volatility assumptions determined in Exhibit 1.1, we then reverse engineer fixed return assumptions and sustainable spending levels for a desired retirement time horizon and targeted probability of success. The investment portfolio is modeled using 100,000 Monte Carlo…
Read MoreChanging Risks In Retirement Pt. Two – Unknown Longevity
This article is part of a series; click here to read Part 1. The fundamental risk for retirement is unknown longevity, which is summarized in the question, how long will your retirement plan need to generate income? It is the risk of running out of assets before running out of time. The length of retirement…
Read MoreChanging Risks in Retirement
It is important to understand from the very outset how changing risks are primarily what separate retirement income planning from traditional wealth management. Retirees have less capacity for risk, as they become more vulnerable to a reduced standard of living when risks manifest. Those entering retirement are crossing the threshold into an entirely foreign way…
Read MoreWomen and Financial Planning
“Think equal, build smart, innovate for change”. It is a time to applaud the progress of women’s achievements around the world. However, even with incredible progress, women face unique circumstances when approaching retirement.
Read MoreWhich Are You More Worried About: Running Out Of Money While You’re Alive Or Dying?
As David Blanchett says: failure is really only failure if wealth is depleted while you are still alive, not just over an arbitrarily long time period.
Read MoreHow Much You Should Spend In Retirement Depends On How Long You Think You’ll Live
In regards to my last column, I find it helps to visualize the data, and Exhibit 1 shows the specific spending rates for a variety of asset allocations and retirement lengths. It also shows the withdrawal rates implied by the required minimum distribution (RMD) rates set by the IRS for tax-deferred retirement accounts.
Read MoreShould You Plan On Your Retirement Lasting 30 Years Or 40?
The 4% rule has a planning horizon of thirty years. But is that a long enough horizon?
Read MoreHow Long Can Retirees Expect To Live Once They Hit 65?
Life expectancy is tricky. Average life expectancy at birth is 71 years, but it’s constantly changing depending on your age and myriad other factors.
Read MoreThree Questions To Evaluate Longevity Risk For Retirees
Longevity risk—the risk of running out of assets before running out of time—is fundamental to retirement. We know about the distribution of longevity for the overall population, but an individual cannot know in advance precisely where he or she will fall in the distribution.
Read MoreWhat Is a Safety-First Retirement Plan?
The safety-first school of thought was originally derived from academic models of how people allocate their resources over a lifetime to maximize lifetime satisfaction.
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