PFP2419. A New Way to Visualize Retirement Income Planning

Creating income from investments that vary over time with an unknown lifespan means that retirees must be flexible about spending. This presentation provides a new way to visualize how choices about investment risk, spending flexibility, and annuitization impact a retiree's income over time. How does investment risk, future asset return assumptions, willingness to adjust annual spending, preference for spending more when younger, and the delegation of longevity risk to an institution impact the range of potential lifestyles? I address each aspect of retirement income planning by comparing how each choice influences possible spending paths from early to late retirement to give advisors a more intuitive understanding of tradeoffs.

Learning Objectives:

• Recognize how uncertainty requires spending flexibility when designing a retirement income plan.
• Determine the impact of investment risk on the range of possible spending paths.
• Recognize why annuities change the spending path by reducing longevity and interest rate risk.
• Determine how to incorporate preference for early or later-retirement spending into a retirement income plan.