Bloomberg and other news services syndicate many financial advice columns every year. One trend we're seeing: More of the columns are about income planning. Here's an example, by an asset manager at Ritholtz.
(Bloomberg Prophets) — Investors are constantly reminded that it's impossible to avoid risk in their portfolio. People are worried about geopolitical risk, interest rate risk, liquidity risk, losing money, volatility, uncertainty and the permanent impairment of capital. The list could go on forever.
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For the tens of millions of baby boomers who have retired or will be retiring in the years ahead, there is another risk that could prove far more important. The biggest threat to the majority of retirees will be outliving their nest egg. As life expectancies continue to climb, managing longevity risk will be a key input in the portfolio management and planning for the 10,000 or so baby boomers retiring every day for the next 19 years or so.
Getting older is a double-edged sword when it comes to your investment abilities. On the positive side of the ledger, as you age you gain valuable experience in the markets, your assets should be growing and you should have learned to avoid costly mistakes. On the other hand, these longer life expectancies lead to a higher chance for cognitive decline in your later years that could prove to be a huge risk to your assets and ability to manage money effectively.
A recent research paper, Risks in Advanced Age, by Michael Guillemette, a professor of financial planning at Texas Tech University, outlines why it makes sense for older investors to pay attention to the risk of cognitive deterioration.
