Bierwirth, Larry
January 1994
Journal of Financial Planning;Jan1994, Vol. 7 Issue 1, p14
Academic Journal
Traditional retirement-planning ledgers create various scenarios of the future for a client by projecting constant rates of return and inflation over hypothetical future years. However, this approach can create a false sense of security for the client-investment returns and inflation are never constant over time. This article proposes an alternative approach: developing a ledger based on real historical data. By testing various investment approaches against historical data, the client can see thc effects of varying rates of return and inflation through overlapping time periods, and the inevitable ups and downs of a portfolio over a typical retirement. By understanding the range of historical results, the client is better able to make informed investment-policy decisions regarding the future.


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