Asset Allocation for a Lifetime

Bengen, William P.
August 1996
Journal of Financial Planning;Aug1996, Vol. 9 Issue 4, p58
Academic Journal
The article states certain queries asked to the author regarding retirement policy by his clients and also the corresponding answers of the queries. The client shows his doubt in allocation throughout retirement and says he will like to invest much in stocks at old age. The author states that his original paper assumed individuals would, in fact, maintain their original asset allocation throughout retirement, or until their objectives changed. Because of the concerns of the client, he decided to study alternative approaches. Another client asks as when they really want to protect their capital. The author comments that there is a high price to pay for that much insurance and when the client reduce stocks each year and replace them with bonds, they are, in effect, replacing a high-return asset with a low-return asset. This lowers the expected return of the portfolio. Consequently, the initial withdrawal rare must be reduced correspondingly to compensate for that, so as to assure the target 30-year minimum longevity.


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