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M*: Q&A With Harold Evensky: Strategies for Securing Your Retirement: Video & Text Presentation
FYI: In a special one-on-one conversation with Morningstar's Christine Benz, noted financial planner Harold Evensky discusses how to maximize savings, build sustainable retirement income, and plan for longevity. Regards, Ted http://news.morningstar.com/Cover/videoCenter.aspx?id=748300
I saved an investment strategy I formulated that this interview reminded me to reread it.
Here's the jest of it:
I've often thought there are really two target dates, one targeting retirement from "work" and one targeting retirement from "earth".
Fully funding a retirement dated fund makes perfect sense. As a retirement dated fund glides towards its maturity date it attempts to provide a smooth landing for your investment at retirement.
Effectively, at "work retirement", an investor would have 100% of their assets in a very low risk retirement fund. This might be helpful if markets happen to severely correct in those early retirement years, but this portfolio will have longevity risk (may not survive as long as you do). So my thought is to reallocate a portion of this portfolio into more aggressive retirement dated fund(s) that attempt to achieve portfolio longevity in retirement.
At retirement, a percentage of this low risk retirement fund could be reallocated into a more aggressive retirement dated funds targeting "earthly retirement".
I could image a retiree laddering a number of retirement dated funds much like CDs are laddered using 5 year increments (laddering equal portions into 2055, 2060, 2065, etc. target dated funds).
Comments
Here's the jest of it:
I've often thought there are really two target dates, one targeting retirement from "work" and one targeting retirement from "earth".
Fully funding a retirement dated fund makes perfect sense. As a retirement dated fund glides towards its maturity date it attempts to provide a smooth landing for your investment at retirement.
Effectively, at "work retirement", an investor would have 100% of their assets in a very low risk retirement fund. This might be helpful if markets happen to severely correct in those early retirement years, but this portfolio will have longevity risk (may not survive as long as you do). So my thought is to reallocate a portion of this portfolio into more aggressive retirement dated fund(s) that attempt to achieve portfolio longevity in retirement.
At retirement, a percentage of this low risk retirement fund could be reallocated into a more aggressive retirement dated funds targeting "earthly retirement".
I could image a retiree laddering a number of retirement dated funds much like CDs are laddered using 5 year increments (laddering equal portions into 2055, 2060, 2065, etc. target dated funds).