TITLE

Modeling Retirement Income

AUTHOR(S)
Jahnke, William
PUB. DATE
February 2005
SOURCE
Journal of Financial Planning;Feb2005, Vol. 18 Issue 2, p22
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This article addresses issues pertaining to the traditional practice in retirement planning in the U.S. as of February 2005. Not long ago, the conventional practice was to formulate asset allocation solutions and model retirement income based on historical asset class returns. Little or no consideration was given to earnings prospects or valuation levels. Insufficient attention to cost and taxes was common. Recently, a number of thought leaders have challenged one or more aspects of the practice, including Peter Bernstein, William Sharpe, Marty Leibowitz, and Harold Evensky. Bernstein set the cat among the pigeons in 2003 when he declared the policy portfolio obsolete. Not only did Bernstein disclaim the well-established practice of setting an asset allocation and sticking with it, he blasted the idea of extrapolating historical returns. Sharpe, chief scientist at Financial Engines, is likewise critical of the practice of extrapolating historical returns. According to Sharpe, some consultants look at a historic period and take the average return which is typically a rotten estimate of expected return. Then they tweak them, and then they round them. Sharpe attacks the current practice of portfolio formation due to its failure to model the portfolio's asset allocation and cash-flow-generating prospects based on the characteristic of the actual securities or funds held in the portfolio.
ACCESSION #
15993292

 

Related Articles

  • A Common-Sense Approach to Asset Allocation. Benz, Christine // Improving Your Finances;Jul2010, Vol. 1 Issue 5, p20 

    An interview with Harold Evensky, president of Evensky & Katz Wealth Management, is presented. He believes that asset allocation didn't fail during the bear market, it was a matter of choosing the right way for diversification. When asked about the difference between tactical and market-timing,...

  • Diversified Fate. Swift, Marie // Research;May2009, Vol. 32 Issue 5, p65 

    The article focuses on the issue regarding the connection between diversification and modern portfolio theory (MPT). It mentions the efforts of several financial advisors in implementing diversification of portfolios through designing an elaborate asset allocation strategies and risk tolerance...

  • Conserving Client Portfolios During Retirement, Part III. Bengen, William P. // Journal of Financial Planning;Dec1997, Vol. 10 Issue 6, p84 

    Part III. Presents findings in the author's ongoing research into asset allocation and withdrawal rates during retirement. Analysis of quarterly retirement; Inclusion of small-cap stocks in the asset mix; Withdrawal rate for tax-deferred portfolios; Inclusion of Treasury bills in the asset mix;...

  • A Common-Sense Approach to Retirement Planning. Benz, Christine // Improving Your Finances;Jul2010, Vol. 1 Issue 5, p26 

    An interview with Harold Evensky, president of Evensky & Katz Wealth Management, on how to approach retirement planning is presented. When asked about the prospect of higher interest rates and its effect on fixed-income portfolios, he stated that their approach is more defensive. Their focus is...

  • Reality check: The implications of applying sustainable withdrawal rate analysis to real world portfolios. Qianqiu Liu; Chang, Rosita P.; De Jong Jr., Jack C.; Robinson, John H. // Financial Services Review;Fall2009, Vol. 18 Issue 3, p123 

    This paper brings portfolio sustainability research closer to practical application by examining how common practitioner investment and withdrawal strategies impact sustainability. The results suggest that the application of a multiasset portfolio model may improve sustainability success rates...

  • rules for rebalancing. Wang, Penelope // Money;Nov2002, Vol. 31 Issue 12, p97 

    Focuses on asset allocations in a retirement investment portfolio. Benefits of asset relocation; Strategies for rebalancing tax-deferred accounts and taxable accounts; Automatic rebalancing is an option offered by Vanguard LifeStrategy Growth, Fidelity Freedom 2020 and T. Rowe Price Retirement...

  • Default lines. Farrow, Paul // Money Marketing;7/2/2009, p29 

    In this article the author analyzes the impact of the Personal Accounts Delivery Authority (PADA) regulation of default funds on the pension plans in Great Britain. He mentions the results of a survey which show that default fund is becoming more important because more people rely on it to fund...

  • The `hoax' is for real. Jahnke, William // Financial Planning;Feb98, Vol. 28 Issue 2, p71 

    Presents financial planner Harold Evensky's views on criticisms against conclusions he made in his article `The Asset Allocation Hoax,' published in the February 1997 issue of `Financial Planning.' Flaws pointed out by Evensky in the article `Determinants of Portfolio Performance,' by Brinson,...

  • Asset Allocation: Issues at Retirement. Ternoey, Brian C. // Benefits Quarterly;1996 Second Quarter, Vol. 12 Issue 2, p21 

    Although investment education has improved and advanced a great deal in the last ten years, many employees are still reluctant to confront asset allocation decisions. There are two events when a retirement plan participant must face asset allocation decisions, namely, at enrollment and at...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics