Retirement income options, happiness and a case of spurious correlation?

A fascinating new paper by L&G titled Retirement Income Riddle: New perspectives on how we make financial choices and their impact on our well-being attempts to look at the relationship between happiness and the retirement income option that people choose.

Conducted by think-tank Demos using the English Longitudinal Study of Ageing (ELSA) database, the research focuses on people on a modest income in retirement (i.e the bottom half of retirement income distribution). It considers whether the choices customers make at retirement have any lasting impact on their well-being.

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Justin King: I'm an investor, get me out of here! Help clients survive the jungle with the power of five.

In this final of our three part series, financial planner Justin King APFS, CFP  talks about how he uses cash buffer within a retirement income portfolio to help client stay the course during a market down turn.

Justin uses Timeline to illustrate how he keeps adequate cash buffer alongside the heavy allocations to equity. The goal is to avoid being forced to sell down on equities during a market downturn. This cash buffer also doubles as a great way to managing client behaviour. By assuring the client that they have ample cash to support their withdrawals during a possible market downturn, they client is far less likely to bail on the plan.

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Legacy & Sustainable Withdrawal In Retirement Portfolio

Often when we talk about the Sustainable Withdrawal Rate framework we often talk about the chances of a client running out of money, this how we usually define 'Success Rate'.

We talk and think about the number/ percentage of scenarios in which the client doesn't run out of money, i.e. the client ends up with a balance of £1 or more in their portfolio. What if we changed that?

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Battle plans, cashflow projections and retirement income planning

Retirement planning is in some respects similar to preparing for battle. While in retirement planning, lives may not be in danger, both do have in common the goal of seeking to maintain independence and dignity. And in retirement the enemy isn’t military aggression, but aggressive inflation, poor sequences of returns and outliving your money.

Our previous story illustrates the problem with focusing on a single-line projection in retirement planning. The fundamental problem is that using straight-line projection creates an illusion of precision, and gives an impression that there is only one plausible outcome. In reality, the exact future outcome is unknown and unknowable. So it’s important that we consider a wide range of plausible scenarios.

In this article, we consider the reasons why straight-line-projections are woefully inadequate when illustrating sustainability of income in retirement.

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