Advances in Retirement Investing

Explains how financial engineering and risk management techniques can help individuals in complex retirement investing decisions.

Lionel Martellini (Author), Vincent Milhau (Author)

9781108926621, Cambridge University Press

Paperback / softback, published 10 September 2020

75 pages
15 x 23 x 1 cm, 0.24 kg

To supplement replacement income provided by Social Security and employer­sponsored pension plans, individuals need to rely on their own saving and investment choices during accumulation. Once retired, they must also decide at which rate to spend their savings, with the usual dilemma between present and future consumption in mind. This Element explains how financial engineering and risk management techniques can help them in these complex decisions. First, it introduces 'retirement bonds', or retirement bond replicating portfolios, that provide stable and predictable replacement income during the decumulation period. Second, it describes investment strategies that combine the retirement bond with an efficient performance­seeking portfolio so as to reduce uncertainty over the future amount of income while offering upside potential. Finally, strategies using risk insurance techniques are proposed to secure minimum levels of replacement income while giving the possibility of reaching higher levels of income.

1. Introduction
2. Why retirement investing matters
3. The decumulation problem: how to annuitize?
4. Retirement bonds and their usage
5. Improving accumulation products
6. Applying risk­budgeting techniques in retirement investing
7. Conclusion: the future of retirement investing.

Subject Areas: Personal finance [VSB], Finance [KFF]