Retirement Income Sufficiency through Personalised Glidepaths

Abstract

Portfolio “glidepaths” accommodate growth in a worker’s early working life and transition to lower risk settings as the worker nears retirement. The success of this design hinges on its objective of amassing wealth at the date of retirement, but the design offers little in the way of a solution for the provision of income during retirement. The relevant risk for workers is retirement income uncertainty. Allocating investments through time to satisfy an income goal is not equivalent to the maximisation of wealth at retirement. We demonstrate that glidepaths can be personalised for individuals to maximise expected retirement income sufficiency under a range of assumptions, including longevity risk.

Disclosure: The authors report no conflicts of interest.

Editor’s Note:

Submitted 18 November 2020

Accepted 11 January 2021 by Stephen J. Brown

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Correction

Notes

¹ An interactive version of the retirement income sufficiency model is available at www.fourierfinance.com/incomesufficiency.