Serving clients effectively as a retirement advisor requires both broad and specialized knowledge. Knowledge isn’t static, however, so it’s important to keep up with retirement income research, the volume of which continues to increase as boomers leave the workforce. Retirement Income: Risks and Strategies (MIT Press, 2012) by Mark J. Warshawsky covers a range of themes that will interest retirement advisors. Topics discussed include annuities, wealth management strategies and financing methods for long-term care.
The contributors are researchers and the material reflects that orientation. Consequently, the text contains numerous graphs and tables to illustrate their research findings. You’ll also encounter functions from financial economics but if you don’t understand the math, the text and tables explain the material clearly. It also helps to read the first chapter, Introduction and Overview, and its Appendix, before starting the book. Although the presented concepts can be complex, the material is applicable to retirement advisors’ work with clients.
The book was published in 2012 and in a recent phone interview I asked Dr. Warshawsky for his thoughts on important topics that retirement advisors should monitor in addition to those covered in the book. One topic we discussed was the 4 percent withdrawal rule that has become a popular rule-of-thumb among advisors and investors. He mentioned that some researchers are questioning whether the strategy, first introduced by advisor William Bengen, CFP in 1994, still holds. “There’s some uncertainty as to whether the old Bengen rule would still work in an environment of low interest rates, maybe somewhat lower overall asset returns but, also, whether it would work… as people live longer and longer,” he says.
“Thirty years really is not long enough anymore and, therefore, I think that’s another theme that I see in financial planning. And, then, finally, I think some people might think that the rule, although it was very elegant and because it was so simple, is maybe a little too simple. Life is more complicated than 4 percent plus inflation can really accommodate.”