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Tail Risk Hedging for Retirement Investments

We really only get one chance to save for retirement. An immediate consequence of this observation is that we cannot simply allocate our retirement dollars to the “market” and hope to have a safe nest egg when we are ready to retire. Averages over all possible outcomes might be interesting for research and analysis, but the reality is that markets take one path, so the law of large numbers is no insurance against market crises.

The impact of a bad market, however short and episodic, can be substantial and permanent. To manage against a knockout punch that can force us to change expectations of our standard of living after retirement, we need to look at the whole path taken by our investment portfolio ...

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