Description
The traditional 4% rule assumes that retirees can withdraw a fixed amount from a volatile investment portfolio. In a world of increasing longevity and lower expected asset returns, this approach to funding retirement income is neither safe nor optimal. This presentation instead uses a goals-based approach that matches investments with expected retirement spending. I discuss new research that demonstrates how investment risk affects spending variability in retirement spending, how spending changes over time, how advisors can better match their investments to meet spending goals, and the tradeoff of various investment and product strategies.
Learning Objectives
1. Develop a 4-step goal-based process that gives clients greater clarity about how their investments translate into lifestyle tradeoffs in retirement.
2. Understand how investment risk requires a willingness to adjust spending when returns are below expectations.
3. Create a goals-based spending plan that defines inflexible and flexible spending goals.
4. Evaluate the cost of funding inflexible spending through bonds through old age versus the cost of funding the same liability with an annuity.