15 min read
In 'The Yin and Yang of retirement income philosophies', Jeremy Cooper and Wade Pfau discuss the two major opposing schools of thought within the world of retirement income planning: probability-based and safety-first.
Understanding the continuum between the two schools is important in achieving the best outcomes in retirement.
This is because traditionally the goal of wealth accumulation is to seek the highest returns possible in order to maximise wealth, subject to the investor's risk tolerance. After retiring, though, the fundamental objective is to actually sustain a living standard while spending down assets over an unknown, but finite, length of time.
Investing during retirement is a rather different matter from investing for retirement. Retirees worry less about maximising risk-adjusted returns and worry more about ensuring that their assets can support their spending goals for the remainder of their lives.