Does it have to be all about retirement? | Opinion | Moneyweb Today

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Source: Does it have to be all about retirement? | Opinion | Moneyweb Today


Wade Pfau: Navigating One Of The Greatest Risks Of Retirement Income Planning

Retirees face market risk, which concerns how market volatility causes average investment returns to vary over time. Sequence of returns risk—the heightened vulnerability individuals face regarding the realized investment portfolio returns in the years around their retirement date—adds to the uncertainty related to overall investment returns.

Source: Retirement and Risk


Wade Pfau: Does Asset Allocation Affect Withdrawal Rates?

One other important factor from William Bengen’s original study is asset allocation. In particular, he recommended that retirees maintain a stock allocation of 50-75%, writing, “I think it is appropriate to advise the client to accept a stock allocation as close to 75 percent as possible, and in no cases less than 50 percent.”

Exhibit 1 provides an illustration of how Bengen reached this conclusion by showing the time path of maximum sustainable withdrawal rates for different asset allocations. It is hard to see exactly what is going on in the 1960s, but the general idea is that higher stock allocations tended to support higher withdrawal rates, with little in the way of downside risk. The SAFEMAX does not appear to be that much lower with higher stock allocations, though the potential for upside with higher stock allocations is quite striking as higher sustainable withdrawal rates are possible with all but the worst-case outcomes.

Source: Asset Allocation



‘Retirement funds adopting principles of reform’ | Opinion | Moneyweb Today

Research Articles

Planning for Retirement: The Most Critical Years

The specific sequence or order of portfolio returns (good, average, or poor) that will occur over the investment term (contribution/accumulation phase and income withdrawal/drawdown phase) plays a vital role in determining the successful outcome of one’s retirement plan, i.e. accumulating sufficient retirement capital at retirement and providing sustainable retirement income over a long post-retirement period, say thirty years.

Source: Critical_Retirementperiods


GMO: Solving a riddle about accumulated retirement values