A New Approach To Safe Retirement Withdrawal Rates

A New Approach To Safe Retirement Withdrawal Rates
Wade Pfau
02/15/13 4 PM EST
IWI
Program Id: 647612897
4.8
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This session introduces a new way of building a retirement income strategy, dramatically departing from the concepts of safe withdrawal rates and failure rates.

 

Borrowing from Prof. Moshe Milevsky, Dr. Pfau explains a retirement income approach based on using broadly diversified portfolio—stocks, bonds, inflation-adjusted and fixed single-premium immediate annuities (SPIAs), along with immediate variable annuities with guaranteed living benefit riders (VA/GLWBs). The methodology adjusts to unique client circumstances, makes return assumptions based on current market conditions, uses a consistent fee structure for fair comparison between income tools, and operationalizes diminishing returns from spending by incorporating a minimum-needs threshold and lifestyle spending goal. Survival probabilities are applied to calculate outcomes. This approach incorporates client preferences to balance the competing financial objectives. A final choice is made by choosing among the collection of allocations that define the efficient frontier for retirement income.

  •             Why retirement income strategies require more than determining a safe withdrawal rate.

  •       How a 65-year old couple requiring a 4% inflation-adjusted withdrawal rate on retirement assets is affected by applying this approach.

  •       Why bonds, inflation-adjusted SPIAs, and VA/GLWBs are, surprisingly, not part of the efficient frontier and not playing a big role in the couple’s optimal retirement income portfolio. 

Speaker, Wade D. Pfau, Ph.D., CFA, will be joining the American College in the spring as a Professor of Retirement Income in their new Ph.D. program on Financial Services and Retirement Planning. He is a past selectee for the InvestmentNews Power 20 for people expected to shape the financial advisory industry, and is a recipient of Financial Planning magazine’s Influencer Awards. His research article on “safe savings rates” won the inaugural Journal of Financial Planning Montgomery-Warschauer Editor’s Award, and his work on evaluating the outcomes of different retirement income strategies received an Academic Thought Leadership Award from the Retirement Income Industry Association. He holds a doctorate in economics from Princeton University, and he has published research on retirement planning in a wide variety of academic and practitioner research journals. He is also an active blogger on retirement research and maintains the educational Retirement Researcher website.

 

Note: This webinar is eligible for IMCA® CE credit.


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5.0

Great material!

Really enjoyed this conversation. Very enlightening.

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4.0

Great. Wish I had the time to finish. Will have to listen to the replay online next week.

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