The Vital Signs of Retirement Income

Abstract

Creative problem-solvers manage complexity and simplify problems by focusing on the essence of the problem and ignoring the distraction of superfluous information, and fields as diverse as aviation, medicine, and high-rise construction use checklists to manage complexity. This paper explains why managing the negative momentum created by market losses and withdrawals is the essence of successful retirement-income management. It describes the vital signs of a sustainable distribution portfolio as well as a checklist for detecting the level of negative momentum embedded in a sustainable distribution portfolio. It closes with examples of how the checklist can change advisors’ current annual review process from an abstract Monte Carlo discussion—one that likely fails to resonate with retirees—to a checklist-driven discussion focused on concrete items that investors can understand as the basis for cash-flow recommendations in retirement.

Keywords: retirement, retirement income

JEL Classification: G10, G11