and were forced to sell equities, the
sequence of returns (investment) risk
was very real, devastating retirement
portfolios. To mitigate against se-
quence of returns risk, some advisors
are recommending a combination of
safe (low) withdrawal rates, buying into
guaranteed income (annuities), and a
rising equities glidepath.
Using the "bucket" approach, where
the first bucket is cash, the second
bucket is fixed income streams, and
the third bucket is equities, assum-
ing the cash and fixed income buck-
ets outlast the recession, the magic
to portfolio replenishment appears
when equity reinvestments throughout
the down cycle purchase cheap equi-
ties. This isn't a perfect solution, be-
cause some retirees may be extremely
uncomfortable buying equities in a
Steps for In-Plan Retirees
Retirement plan committees with or
anticipating in-plan retirees should in-
vestigate various flight plans for retir-
ees. Does your plan have a low-cost
guaranteed income component? Do
you provide pre- and post-retirement
training to help retirees take advantage
of the particular market environment
they retire into? Is your retirement plan
committee proactive and innovative?
In the 1950s and `60s, farmscapes de-
veloped into suburbs and schools for
Baby Boomer families. Today's Baby
Boomer retirement landscape is also
charting unknown territory. Every re-
tiree's life is different; retirement plan
committees and the finance execu-
tives on them need to remain vigilant
to the changing conditions.
For those who remember Monty Py-
thon fondly, it's stunning to realize
we are now less liable to engage in
silly walks unless preceded by an in-
jury, but hope and laughter are just a
click away: https://www.youtube.com/
Julie McNeal is the CTCPA
Director of Finance and Opera-
tions. She is the staff liaison to
several technical interest groups
including State Taxation, Federal
Taxation, Not-for-Profit Organiza-
tions, and Trust, Estate, and Gift
Taxation, as well as the CTCPA
She can be reached at juliem@
ctcpas.org or 860-258-0236.
Outliving retirement assets.
Investment (Sequence of Returns) Risk
Selling into a down market.
Interest Rate Risk
Depending on whether assets are cash or bonds, major
shifts in interest rates may affect the available cash stream.
Withdrawing too much, thus depleting available assets.
Inflation and the cost of goods and services outpacing
Cognitive Impairment Risk
Decisions retirees make that may not be in their best long-
Unanticipated Expense Risk
Illness, divorce, uninsured major home repairs, etc. taking a
large bite out of assets.
Public Policy Risk
Changes to Social Security, Medicare, tax rates, healthcare
policy, regulation of investments, etc. changing anticipated
Major Retirement Income Risks