Research magazine's May issue looks at life-cycle investing, the 4% rule on retirement income and how to be a leader in your own career and life.
The cover story, "Investing for a Lifetime," focuses on Milwaukee financial advisor Paula Hogan, whose innovative blending of life-cycle theory and life planning provides a promising path for the future of financial advice.
The latest Finke on Finance feature asks: "Is the 4% Rule Folly?" The longstanding staple of retirement income advice, that one should plan on withdrawing 4% of assets each year, requires revision in light of new research, argues Prof. Michael Finke.
"The Advisor as Inspirer" examines the principles of sound leadership and how advisors can incorporate them.
To preview these articles and more, click through the following slides.
This month's cover story, by Jane Wollman Rusoff, contemplates Paula Hogan's incorporation of life-cycle theory and life planning into her advisory practice. Excerpt:
A decade ago, Paula H. Hogan had one of those incredible a-ha moments—and her financial advisory practice has never been the same. This was no fleeting "I coulda had a V8!" epiphany. It was profound, with deep implications for the advisor's business—perhaps even for the entire financial services industry.
That insight hit when the FA, founder and managing member of the Milwaukee-based firm bearing her name, read a couple of eye-opening Financial Analysts Journal articles written by economists: one story by Zvi Bodie, the other by Robert Merton. Both were about lifecycle investing, a school of thought that seeks to optimize income and spending, matching investment risk to goals.
Michael Finke scrutinizes a longtime fixture of retirement planning wisdom. Excerpt:
Somewhere along the line, the shortfall methodology that underlies the 4% rule was anointed the gold standard for judging withdrawal rate strategies. What began as a good-faith exercise to point out the risks from withdrawing too much each year from a retirement portfolio has gained a mythic and potentially unhelpful place among advisors. It's time to dust off the 4% rule and see whether it deserves its place on the shelf of best practices.
First a mea culpa. My co-authors David Blanchett, Wade Pfau and I recently pointed out that low bond yields may nuke the 4% rule. We used the same shortfall methodology, but we ran a Monte Carlo analysis since we don't have historical bond rates as low as the current real bond rates. So I've used the shortfall methodology in my own research.
