Payden/Wilshire ::::Retirement Risks

PHILOSOPHY & PROCESS

		It goes without saying that most people, health permitting, would like to live as long as possible. Moreover, during the later years of retirement, people treasure their independence, are eager to maintain their lifestyle, and certainly don’t want to run out of money, which is the core of longevity risk. Scientific advances in healthcare and increased focus on proper nutrition and exercise have slowed the aging process. Today, a 65-year-old retiree can expect to live to age 85. If he or she lives to age 70, the live expectancy expands to age 86. In other words, the longer you live, the longer your life expectancy.
Solution: Continually adjust allocations after the Target Date

		By the time an investor reaches retirement age, he or she is probably aware of the havoc inflation can wreck on one’s spending power. But during their working years, they likely benefited from salary adjustments that helped them keep up with inflation, if only partially. Retirees on a fixed income are not likely to see many adjustments for inflation. Over the course of a 20-year retirement, even a modest inflation rate of 2.5 percent will erode spending power by as much as 40 percent.1
Solution: Balancing capital accumulation and capital preservation

		After a lifetime of saying it’s time for the investor to start enjoying the fruits of his or her discipline. But as the investor transitions from an accumulation phase to a distribution or “decumulation” phase, he or she will need to invest a portion of their assets in liquid securities like cash and TIPS. This will preclude the untimely sale of equities, which is to be avoided if possible. We would not want to force an investor to sell equities in a bear market when they may be in a losing position.
Solution: Incorporate a retirement cushion

Payden / Wilshire Longevity Funds
333 South Grand Avenue | Los Angeles, CA 90071 | info@paydenwilshire.com | 877 870-8877 | Site Map

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