Retirement Income Financial planning tools and retirement research predominately assume that retirement spending is effectively static, where the annual spending amount increases annually with inflation, regardless of portfolio performance. This simplifying assumption is clearly unrealistic and can result in incredibly flawed guidance on optimal portfolios for clients.
In some recent research , we explored how incorporating flexible spending in retirement modeling can impact the definition of the optimal retirement portfolio. First, we split the retiree income goal into two types of expenditures: “needs” and “wants.” Needs are relatively inflexible spending that the retiree can’t live without—things like housing and healthcare […]
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