Seeking Alpha

Retirement Advisor: Retiring At The Worst Possible Time (Podcast)

by: SA For FAs
Summary

UBS’s new “Bear Market Damage Index” puts hard numbers onto a very real problem — sequence of returns in retirement.

The problem is that a retiree’s investment performance is heavily dependent on the kind of returns the market generates at the point of retirement.

UBS combined the worst characteristics of each postwar bear market, thus postulating a bear market that took 74 months to return to its former high.

A liquidity strategy keyed to this worst of worst case scenarios did far better than a 100% equity strategy, despite the complete recovery of the market’s former high.

The cash-cushioned investor was probably quite a bit happier too.

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UBS’s new Bear Market Damage Index puts hard numbers onto a very real problem — sequence of returns in retirement. UBS postulated a bear market that took 74 months to return to its former high.

This podcast (5:45) reports UBS’s calculation that a liquidity strategy keyed to this worst of worst case scenarios did far better than a 100% equity strategy. These numbers should be of interest to anyone who thinks the next bear market might be a big one, and may also suggest a longer liquidity window than most advisors budget for.