Practical Applications of Retirement Planning: From Z to A

Abstract

In Retirement Planning: From Z to A, from the Fall 2020 issue of The Journal of Retirement, author Javier Estrada (of IESE Business School in Barcelona) challenges the way in which many investors approach retirement planning. Younger people tend to focus on the level of assets they want to have at retirement. Only much later, when nearing retirement, do they think about how much they will need to withdraw from savings each year during retirement. Estrada says this approach does things in the wrong order and that retirement planning works best when you start at the end. Investors should first figure out how much they will need to withdraw from savings each year during retirement, how much they want to leave to their heirs, and the mix of investments with which they will feel comfortable during retirement. Once they have that information, they can calculate the total dollar amount they will need to have in their portfolio on their retirement date. With that knowledge, they can calculate how much to save each year while they are working and how to invest to reach their retirement goal. TOPICS: Long-term/retirement investing, portfolio management, retirement, wealth management