tag:blogger.com,1999:blog-6167053228142922997.post4015820648012023315..comments2023-10-30T11:57:40.433-04:00Comments on Wade Pfau's Retirement Researcher Blog: Asset DedicationAnonymoushttp://www.blogger.com/profile/04168922717655562721noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-6167053228142922997.post-75914778864394097682012-12-06T11:38:29.273-05:002012-12-06T11:38:29.273-05:00I read the Asset Dedication book when it was first...I read the Asset Dedication book when it was first published in 2004. Overall, I think it provides a much better approach to retirement investment planning than the probability-based approach because it promotes asset-libability matching. As you point out, however, asset dedication procedures need to be vetted because it relies on the equity portion of the portfolio to refurbish the bond ladder over time. Thanks for your review of this critical retirement planning topic, and I look forward to your conclusions after Monte Carlo testing the various asset dedication approaches outlined in the book. John Harrishttps://www.blogger.com/profile/12991108703598946824noreply@blogger.comtag:blogger.com,1999:blog-6167053228142922997.post-46823067483930130552012-12-06T11:03:02.515-05:002012-12-06T11:03:02.515-05:00Thanks Wade: however the link didnt work for me. I...Thanks Wade: however the link didnt work for me. In case others also have trouble I found one at <br />http://content.ebscohost.com/pdf9/pdf/2008/0L9/01Aug08/33941670.pdf?T=P&P=AN&K=33941670&S=R&D=buh&EbscoContent=dGJyMNXb4kSeqa84zdnyOLCmr0qeprRSrq%2B4SbKWxWXS&ContentCustomer=dGJyMPGssk2xqLJNuePfgeyx44Hy<br /><br />however it is not a very good quality copy of the articleAnonymoushttps://www.blogger.com/profile/05715923932714221467noreply@blogger.comtag:blogger.com,1999:blog-6167053228142922997.post-75264471595757950902011-10-03T05:04:36.494-04:002011-10-03T05:04:36.494-04:00I'm glad to read your post since I am not yet ...I'm glad to read your post since I am not yet familiar with this book, which seems to adopt the basic principle I am coming to believe should underpin investing during retirement - namely, that one should be matching liabilities / spending with assets / investments with respect to timing, price volatility, inflation characteristics e.g. owning a house perfectly matches housing expenditure liability. <br /><br />The big question with regard to stocks, and an assumption that you state clearly enough, is whether the future will be like the past. Or will it be different next time? Being blindly confident that stock market history will repeat itself seems to me inadequate. The assumption needs to be directly addressed. To that end I suggest that the book Economic Transformations by Lipsey, Carlaw and Bekar provides tests (and from my reading, reason to hope) of conditions needed for economic growth, and therefore stock market growth, to continue. Of course, as has been noted also, economic growth does not ensure stock market success. Profits can be captured by others than public stockholders.CanadianInvestorhttps://www.blogger.com/profile/05645767559302303541noreply@blogger.comtag:blogger.com,1999:blog-6167053228142922997.post-65589615506237663402011-09-17T08:13:25.374-04:002011-09-17T08:13:25.374-04:00For anyone interested, here is a link to Zachary P...For anyone interested, here is a link to Zachary Parker's article:<br /><br />http://spwfe.fpanet.org:10005/public/Unclassified%20Records/FPA%20Journal%20August%202008%20-%20Income-Harvesting%20Strategy%20Achieving%20Inflation-Adjusted%20Income%20from%20a%20Lump-Sum%20Asset.pdfAnonymoushttps://www.blogger.com/profile/04168922717655562721noreply@blogger.comtag:blogger.com,1999:blog-6167053228142922997.post-60413360176306897962011-09-17T08:07:55.772-04:002011-09-17T08:07:55.772-04:00Thanks a lot for the comment. I haven't read ...Thanks a lot for the comment. I haven't read that article yet, but it has definitely moved to the top of my reading list. What you are writing makes perfect sense to me. I may not have explained it well, but I think this approach could also fit into the "3. Flexible horizons" category I mentioned above.<br /><br />My thinking about this is that more risk averse retirees will want to have a longer average time horizon for fixing in their spending. For someone retiring around 2008, for instance, the risk averse person may have already locked in 10 years of spending and so their stock allocation would have been lower already. Also, I think that this horizon should be flexible for the exact reasons you state. I'm definitely going to read that article now. Thanks again!Anonymoushttps://www.blogger.com/profile/04168922717655562721noreply@blogger.comtag:blogger.com,1999:blog-6167053228142922997.post-90606064109045246812011-09-16T17:14:42.149-04:002011-09-16T17:14:42.149-04:00I haven't read the book so I am just respondin...I haven't read the book so I am just responding to your blog comments on it, but I would not think being 100% in stocks would be the optimal configuration for the lead up to tapping the funds to lock in spending. If one could pick their end date, this might work, but this would have been disastrous in 2008. Given one never know what will happen, I would think the optimal asset allocation would reflect more of the 50/50-75/25 stock/bond mix that shows more forgiveness in downturns with modest sacrifice on return (even though we are talking about the "growth"/accumulation part of the equation). But maybe his approach has a twist in how/when the bonds lock things in that I am missing.<br /><br />The retirment income planning idea that has resonated the most with me was the Income Harvesting approach outlined by Zachary S. Parker in a August 2008 Journal of Financial Planning article. He basically says keep a rolling 3-7 year bucket for income by continually filling it when you have excess returns and riding on this bucket when the market is negative. I am curious of what you think of his approach. The idea of harvesting excess returns is often the missing discipline needed to take advantage of positive markets (make hay when the sunshines as they say.....).T Kadelanoreply@blogger.com