Russell Investment Group Senior Strategist Richard K. Fullmer has offered a new approach to retirement income planning in a recent issue of The Journal of Financial Planning.

With a primary focus on providing a steady stream of income for retirees, and making leaving an inheritance to beneficiaries a secondary goal, the paper argues that most financial planners do not treat asset decumulation as a separate goal from asset accumulation.

Fullmer also says that modern portfolio theory doesn’t take longevity risk into account.

Thus, instead of concentrating on annuities and spending management as a solution to retirement income, Fullmer advocates doing a better job of managing a retiree’s portfolio through a dynamic asset allocation strategy. He also says that investors should not buy an annuity before they need one.

“Although modern portfolio theory may serve the industry well for those saving for the future, it falls short as a methodology for decumulation,” Fullmer says. “Traditional modern portfolio theory assumes no cash flows, which are the retiree’s primary investment objective, and ignores the investor’s risk aversion for failure to achieve the cash flows.”

To manage longevity risk, Fullmer says investors and their financial planners should start with a “drop dead” date (no pun intended), which the investor is unlikely to reach and work backwards from there, creating a spending and investing plan to last to that date.

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