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You May Need a Different Kind of Financial Professional for Retirement

MarkMark
in Fund Discussions
From the AAII Journal, January 2020. Written by Julie Jason.

"For those who are soon to retire or have recently retired, there is an inflection point between receiving a paycheck from an employer and a paycheck from your portfolio. For retirees who rely on their investments for retirement income, it is also one of the riskiest, if not the riskiest, time in an investor’s life. After all, you won’t go back to work for 45 years to recover from mistakes.

What type of financial service is best for the retiree who needs to “live off of” their investments?"

ARTICLE

Comments

  • msf
    edited January 2020
    " For retirees who rely on their investments for retirement income, [the time at which one starts drawing on investments] is also one of the riskiest, if not the riskiest, time in an investor’s life."

    If you agree with that (I do), then it must follow, as the night the day, that your later years of retirement are less risky times. Thus it makes sense that you invest most conservatively when you begin retirement, and more aggressively as you move through retirement. In part that is to make up for the very conservative portfolio you start with.

    That's the point and conclusion of work by Pfau and Kitces on rising equity glidepaths in retirement. There have been many reports and refinements of that work. I offer just one link below for the basic idea.

    https://www.onefpa.org/journal/Pages/Reducing Retirement Risk with a Rising Equity Glide Path.aspx
  • jeffb
    Right. Sequence of returns risk is greatest at year 1 of retirement, generally the first 10 years or so of retirement have the major risk (decreasing yearly). The 5 or so years before retirement is also very significant in determining amount of portfolio available for withdrawal. During this 15-year period, be very diversified and if you don't maintain a consistent asset allocation (say, 60/40), be more conservative in this period.
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