retirement planning planning

pogo

Say you were to retire tomorrow with indeterminate cash outflow needs, what sort of immunization strategy would you prefer to use, cash flow matching or horizon?

former

If your cash outflow needs are "indeterminate", how exactly are you going to "immunize"?
Sounds like an asset-only method situation to me.

MarginofSafety

I thought that "lifestyle protection" was some sort of made up answer meant to confuse; it made me think of Trojan condoms for some reason.. I guess it worked!



Edited 2 time(s). Last edit at Saturday, June 11, 2011 at 08:28AM by eikichionizuka.

LBriscoe

Was this a real question?

mkytz15

Go to Fidelity.com or T Roe Price.com. The have a "Retirement Income Planner" on the site.

The planners are run using Monte Carlo Simulation. Once you have a the core inputs (expected income need, expected retirement date, current assets, expected savings between now and retirement) it will give you confidence levels of running out of funds or not. They will usually give you 90%, 75% and 50% levels ( 90% is the downside nobody worries about the upside volatility).

The models do have a ton of variables but many are built into the tool (inflation, taxes, returns, etc). You can change the returns by changing the asset allocation, some allow you to change taxes and inflation. If you dig deep into the models and read how they are built you can change the inputs around and get some pretty solid outputs on "what ifs". Considering they are a free online tool it can really do allot.

For a retail client you could buy a bunch of bonds with very long maturities that have a "Death Put" option. That way you can get the higher rate now and not have the interest rate risk to the estate.