In Part One of this book, we reviewed the new risks you face as you approach retirement. Now that you can see those risks coming, how do you protect yourself against them?
In this part, we outline the new approach of product allocation, which will augment asset allocation to guide you through retirement; explore the true function of pensions; help you calculate your Retirement Sustainability Quotient; and ask the most difficult question you will ever have to answer about your retirement goals. Curious? Dive in!
So far, we have discussed the decline in pensions and the need for pensionized income. We’ve told you the new risks you face as you leave the accumulation stage of financial planning and begin to use your assets to fund your retirement. The main takeaway from the preceding section of the book is that asset allocation, despite its value in the accumulation stage of life, is not sufficient to protect you into and through retirement.
Now, you’ve already done a lot of work preparing for retirement. Today, if your financial adviser asked you, “How much would you like to allocate to stocks, and how much to bonds?” you’d probably have an answer. If she asked you, “How much would you like to allocate to domestic stocks, and how much to international equities?,” you’d probably have some thoughts on that. And if you were asked, “Would you like to focus on value stocks (like ...