"Retirement is expensive."
"In general, the life-cycle model research shreds conventional wisdom regarding one-size-fits-all rules of portfolio design and management. There appears to be neither an optimal allocation for all seasons nor an optimal withdrawal rule for all portfolios."
- Patrick Collins
CHART OF THE DAY
RETIREMENT FINANCE AND PLANNING
4 Ways to ManageSequence of Returns Risk in Retirement, Pfau.
Attempting to sustain a fixed living standard using distributions from a
portfolio of volatile assets is an inefficient retirement income strategy. This
is a unique source of sequence risk. Four general techniques for managing
sequence risk in retirement are highlighted in Exhibit 1.
The Ultimate Guide to Safe Withdrawal Rates – Part 13:
Dynamic Stock-Bond Allocation through Prime Harvesting,
Earlyretirementnow.com Prime Harvesting
is an intuitive method to dynamically shift the stock/bond allocation in
retirement. In the past, it would have sustained slightly higher withdrawal
rates than the fixed percentage rule when it mattered the most: when stocks did
poorly right after retirement. We propose one improvement to this methodology;
use a smoother version that avoids selling massive amounts of equities all at
once. Letting equities rest at the upper guardrail and skimming only the excess
equity wealth above the guardrail seems to be a more sensible approach. It not
only avoids the discontinuities and jumps in the final asset value chart above
but also tends to afford slightly higher SWRs.
Retirement Roulette, Dirk Cotton. Like roulette, retirement funding is a series
of "rounds"(typically years) during which the retiree makes a series
of decisions (bets) and the universe responds. These first two characteristics
define what game theorists refer to as a sequential stochastic game against
nature.
An Investing Road Map for Retirees, Morningstar.
Intention to Unretire, ssrn.
Although nearly half of retirees follow a nontraditional retirement path
that involves partial retirement and/or unretirement (Maestas, 2010),
unretirement has received little attention. [Me, I'm shooting for 2018 for those that are interested and/or opinionated]
From Failure to Success: Replacing the Failure Rate,
Estrada, This article introduces a new
variable, years sustained, that focuses on success rather than on failure. The
ratio between its mean and standard deviation, risk-adjusted success, is the
single variable proposed here for a comprehensive evaluation of retirement
strategies.
Longevity Risk And Retirement Income Planning, Literature Review, Collins, Lam, Stampfli 2015. [tipped off to this by a reader. Geared towards practitioners and researchers
I think but if you know the topic area this a preternaturally good and synoptic
cover of the source materials]
MARKETS AND INVESTING
What’s Past is NOT Prologue, [on the weakness of using track
records]. ElmFunds.com All this discussion on the low value of historical
returns in most investment contexts may leave you feeling either depressed or
liberated, depending on your perspective and occupation. If you’re an investor,
it’s really not so bad: just stick to investments where you don’t need to rely
on the track record to make your decision. That leaves almost all of the
direct, cost-efficient, investible universe open to you– bonds, equities, real
estate and any strategy where you can produce a reasonable forward-looking return
estimate without relying on past returns.
An Integrated Investment Plan Is Key. Swedroe. Today I will focus on mortality and longevity
risk, and using “tax alpha” strategies to improve the odds of achieving your
financial goals.
ALTERNATIVE RISK
A Simulation-Based Rebuttal to Research Affiliates,
Newfound. We believe that a sufficient
proportion of the shortfall can be explained by estimation error in their
process and, therefore, we should refrain from drawing conclusive results until
more evidence is published.
How Do You Know If Your Investment Strategy Has StoppedWorking? Cordant. Periods of low
returns, while not a lot of fun to sit through, should be expected. As Ed Thorp
remarked about his approach to blackjack (and later investing), if our
performance falls within the range of possible outcomes, it shouldn't cause us
to doubt our results, or our strategy.
SOCIETY AND CAPITAL
Securities-based loans are scaring fiscal experts.
NYpost. Forget subprime mortgages — one
of Wall Street’s biggest risks doesn’t even show up on most banks’ balance
sheets.
Characteristics of US Minimum Wage Workers. Tim Taylor. I'm of course well aware that few people will
dramatically alter their opinion about the minimum wage based on these kinds of
facts… Still, having an agreed-upon fact base may at least set boundaries of
realism that rule out some of the more extreme claims…
Poverty lines vs GDP per Capita, Data visualization from
OurWorldInData.com
Animation: The Collapse of the Middle Class in 20 Major U.S.Cities, Visual Capitalist.
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