Schroders
October 17, 2019
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Invert, always invert: the key to sustainable retirement income

10/03/2019

 

 - Edward Studd, Solutions Manager

Deciding how much money to withdraw from savings to provide an income in retirement is a highly complex and challenging concept. This is true even for experienced professionals who work with uncertainty around investment strategies and longevity for their day job. How long do I expect to live? How well do I expect my assets to perform? How much do I expect that I need to spend?

To answer requires lots of assumptions on how we expect the future to evolve. However, in reality our lives will pan out far from any expectations that we come up with. Indeed as things evolve the problem becomes a dynamic system with lots of complexity, dependencies and feedback loops.

One technique that can be used to help solve challenging problems is to invert them, i.e. to turn the problem upside down or look at it backwards. This is something that has been popularized by Charlie Munger (Warren Buffet’s business partner), taking a leaf out of mathematician Carl Jacobi’s maxim “Invert, always invert”.

Applying this concept to post-retirement, does indeed help crystalize how to approach post-retirement withdrawal strategies. This is because, for sure, the thing that everyone would want to avoid in retirement is out-living their assets as this would effectively create a form of personal bankruptcy.

So the question now becomes, how do I avoid running out of money?

To find out more, download our full paper by clicking on the banner below.

 

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This site is for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy any security which may be referenced herein. This site is solely intended for use by institutional investors and institutional-investment industry consultants.

Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada.  Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada.  SFA markets certain investment vehicles for which other Schroders entities are investment advisers.

Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit www.schroderscapital.com

SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.



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