Category Retirement Finance
Annuity/Pension vs. Lump-Sum- Part 3: Quantitative considerations
In a nutshell In this blog post (Part 3 in the series), in the context of a specific example for a 67 year old couple, we explore quantitative considerations toward the annuity/pension vs. lump-sum decision, such as: (1) fixed and discretionary expenses, (2) capital market expectations, (3) how/when/if to annuitize, (4) understanding the value delivered […]
Annuity/Pension vs. Lump-Sum- Part 1: Making the right decision for you
In a nutshell In Part 1 of this five part series, the focus is on: (1) risks in retirement, (2) life expectancy and impact on retirement planning age and (3) annuities are insurance not investment The three key risks in retirement are: longevity risk, inflation risk and market risk. Annuities/pensions address some aspect of these risks, while […]
Two very different decumulation strategies
Summary This blog post provides additional details associated with a couple of interesting papers I mentioned over the past few weeks. The first is by Sexauer and Siegel proposing a self-executed low-/no-risk approach to retirement planning which aims to deliver DB plan like outcome. The second is Sheikh, Roy and Lester’s dynamic decumulation strategy which […]
Annuity or Lump-Sum (LIF): Upcoming Nortel pensioners’ decision
In a nutshell In this blog I address the “annuity or lump sum?” and the “if, when and how much to annuitize?” questions with a discussion of the pros, cons and other qualitative considerations that go into this very personal decision. “Annuity or Lump-sum?” One could very simply just take the annuity option (“status quo […]
Optimal withdrawal strategy for retirement income portfolios-A review
In a nutshell: The authors compare five retirement withdrawal strategies (under the constraint that the retiree considers bequests to be of zero importance) and define a measure of Withdrawal Efficiency Rate as a means to compare them. They conclude that the commonly mentioned/used “Constant Dollar” (first year 4% of original assets, then adjusted annually for […]
“The Intelligent Portfolio” by Christopher L. Jones
This book offers easy to understand investment advice, explains what’s important and what is not, and how/why things work the way they do based on modern portfolio theory. Well worth your reading time. While the book does a great job on the retirement asset accumulation part of one’s lifecycle unfortunately, it dismisses quite lightly the […]
The Pursuit of Risk Management
In a Nutshell Risk is unavoidable; it is part of life. There are known, unknown and unknowable risks. The best we can hope for is to undertake the pursuit of risk management, in order to minimize the impact to the best of our understanding and abilities. -the probability and financial impact of a risk determines […]
Asset Allocation II
(Originally posted October 28 2009) “There is only one free lunch in investing, and this is asset allocation….Over time, it consistently leads to higher returns and lower risk.” (“Krawcheck stakes her new claim” This blog should be read in conjunction with the Asset Allocation blog under the Education tab of this website. The objective here […]
Protecting the Downside, while Participating in the Upside
Protecting the Downside, while Participating in the Upside A couple of months ago in “Lifecycle investing” I, superficially touched, upon Zvi Bodie’s view that diversification is not the only way to reduce investment/market risk. In fact, according to him, it may not even be the best way. In a reference that I quote in that […]
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