Recent News

Liability Driven Investing by Karen Elise Kilbride

Jul 3, 2020

If you think about it, retirement is our largest personal financial liability for our lifetime. We need to figure out how to fund thirty to forty years of retirement spending needs and not run out of money.

Funding our retirement optimally includes determining an appropriate mix of Social Security benefits, pensions, annuities and investment portfolio resources to help support retirement cost of living needs for our life expectancies.

We face many risks in retirement including rising income taxes, inflation pressures, stock market volatility and periods of poor market returns, rising health care costs and the risk of outliving our resources, longevity risk.

Outliving our resources is the biggest risk in retirement. Once we elect our Social Security benefits, begin receiving pension and annuity payments, implementing and managing an investment strategy which helps to support our total retirement liability completes the process.

The retirement investment strategy is not a set it and forget it allocation as changes occur to our circumstances and actual external risk scenarios play out over time creating opportunities and challenges which require adjustments beyond rebalancing the strategy to help manage the updated retirement liability.

For example, changing economic, tax, and financial market conditions today have both created opportunities for tax savings as well as increased investment risks from heightened market volatility from the pandemic and economic declines.

If we are indifferent to the changing risk environment around us, we stand to lose wealth from paying more than we should for income tax, we may sell securities in decline and realize a permanent loss to our retirement portfolio both of which can increase our longevity risk with less wealth to meet our total retirement liability.

Managing our retirement investment portfolio is a dynamic ongoing process which is fully integrated with our retirement liability and plan. To venture into retirement without identifying and creating a plan to help us mitigate risks and manage our circumstances ongoing, we can increase our chances of outliving our resources, a costly decision.


View more of our services
View more of our services Wealth Management »