Down the Retirement Risk Zone with Gun and Camera
19 Pages Posted: 24 May 2014
Date Written: October 15, 2013
The retirement risk zone represents a fragile period in the financial life cycle of people in defined-contributions superannuation. It primarily affects people of middle means. Sequencing risk has been described as an independent risk but it has largely been a consequence of the dominant asset allocation strategy, described here as aggressive constant-mix. Lifetime glide paths should instead resemble a displaced V: the share of growth assets should fall by something like 20 to 50 percentage points over working life, then another 5 or 10 percentage points on the day of retirement, but should subsequently rise through retirement, by something like 20 to 30 percentage points.
Keywords: constant-mix strategy, defined contributions superannuation, glide paths, retirement risk zone, sequencing risk
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