Retirement Portfolios : Theory, Construction and Management

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2010-01-26
  • Publisher: Wiley
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Retirement portfolio guidance for finance professionalsRetirement is one of the most important parts of the financial planning process. Yet only two percent of financial advisors describe themselves as competent in retirement planning.Constructing a retirement portfolio is viewed as a difficult endeavor, and the demands facing financial advisors responsible for this task continue to grow. The pressures are particularly intense due to events such as the financial crisis and oncoming rush of retiring baby boomers. It is imperative that financial advisors be equipped and ready to create appropriate retirement portfolios. That's why Michael Zwecher-a leading expert on retirement income-has created Retirement Portfolios. Examines how portfolios should be prepped in advance so that the transition from "working" portfolio to retirement portfolio is smooth and seamless Outlines how to create a portfolio that will provide income, continue to generate growth, and protect assets from disaster Details the differences in managing a retirement portfolio versus managing portfolios during asset accumulation yearsThe ability to create retirement portfolios and manage their risks are skills you must possess to be an effective financial advisor. Retirement Portfolios will help you develop these essential skills and gain a better understanding of the entire process.

Author Biography

MICHAEL J. ZWECHER is a leading expert on retirement income. He has created guidance, designed products, tools, and portfolio constructions that appeal to the financial advisor community and their clients. Zwecher co-chairs the curriculum committee of the Retirement Income Industry Association. He spent over ten years at Merrill Lynch, holding senior roles in risk management and wealth management, where he ran the Investment Management Strategic Solutions team in the Financial Products Group. Prior to Merrill, he was a consultant with Deloitte, an assistant professor at the Graduate School of Business Administration at Fordham University, and a visiting associate professor at the University of Wisconsin–Madison. Zwecher holds a PhD in finance from the University of Wisconsin–Madison.

Table of Contents

Preface: Life in 2009 and Beyond
Framing the Problem
Portfolio Focus and Stage of Life
A 'Balanced' Portfolio Approach May Not Last Through Retirement
Retirement Saving versus Retirement Income: An Illustration
Products versus Solutions
The Top-Down View
A Short Primer on Economic Models of Retirement Income
An Overview of Economic Models of Retirement Income
Reconciling Retirement Income Portfolio Construction with Accumulation
The Dynamics of Risk Aversion
Separation between Flooring and Upside
Fully Funded vs. Under-Funded Flooring
Monetizing Mortality
Taking Market Risk
Risk is Risk, Is it Not?
Risk, Uncertainty, and Risk Aversion
The Importance of Lifestyle Flooring
Amount of Flooring: A Balance Sheet View
Retirement Requires Outcomes, Not Just Expectations
Consumption Needs
Yes/No Planning
The Window for Maintaining Lifestyle
The Bedrock Floor
The Aspirational Floor
The Finished Floor
Nominal versus Real Flooring
Types of Flooring
Choosing a Flooring Type
Monetizing Mortality
Annuities and Longevity Insurance
Risk Pooling
Pure Longevity Insurance
Complex Annuities
Credit Risk and Insurance
Flooring with Capital Markets Products
Government Issued Securities
Creating a Floor of Strips
Municipal Securities
Corporate Securities and Other Financial Products
Adapting Portfolios for Retirement Income
Building Retirement Income Portfolios
Portfolio Sleeves for Retirement Income
Portfolio Intuition
Basic Portfolio Constructs
General Accumulation Plans for Retirement Income
Taxes and Retirement Income Portfolios
Creating Allocations for Constructing Practical Portfolios by Age and Lifestyle Needs
Flooring Allocations
Longevity Allocations
Precautionary Allocations
Discretionary Equity Allocations: Assets with Risk
Summary of Allocations
Managing Portfolios for Retirement Income
Rebalancing Retirement-Income Portfolios
Rebalancing the Discretionary-Wealth Subportfolio
Rebalancing the Functional Components
Raising the Floor
Active Risk Management for Retirement-Income Portfolios
Static Example
The View from the Capital Markets Line
Risk Management and Expected Returns
Simple Rules: For Passive and Active Risk Management
An Inelegant but Simple Plan
High Water Mark Flooring
The Cushion
Risk Rules - Periodic Rebalancing
Risk Rules - More Active Rebalancing
CPPI and Volatility
Taxation and Active Management
Locking in Flooring, Long End vs Short End
A Quick Note on Usability, Scalability and Approaches other Than Liability Matching
Playing with Fire in a Retirement Income Portfolio
Making it Happen
The Transition Phase
What the Transition Is About
The Order of Transition
A Difficult Transition
When to Transition
Making the Transition Seamless
Creating a Business Model That Includes a Natural Transition
Sudden Transitions
Putting Together the Proposal
Laying out Client's Assets to Show Current Status
Minimally Invasive Surgery: Reconfiguration Proposal
Lifestyle and Flooring Types
Accumulation Plan Types
Passive vs. Active Risk Management
Market Segmentation
Segmentation for Traditional Portfolios
Segmentation for Retirement Income Portfolios
Products and Example Portfolios
Overview of Products Offered
Managing Expectations Around Outcomes
Example Portfolios
Preparing Your Client for a Retirement Income Portfolio
Know Your Resources
Lifestyle and Life-Cycle
Risks to Your Retirement Lifestyle
Lifestyle and Flooring Types
What the Adviser Needs from the Client
Salvage Operations, Mistakes, and Fallacies
Mistakes and Fallacies
How to Dig out of a Hole
History of Theoretical Developments in Life-Cycle Planning
The Model
Rising Lifestyles and Habit Formation
Empirical Studies of Life-Cycle Behavior
How Professionals Can Maximize the Usefulness of this Book
Transaction-Oriented Salespeople
Asset Gatherers
Insurance Planners
Financial Planners
Portfolio Managers
Table of Contents provided by Publisher. All Rights Reserved.

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