Level of Complexity: Intermediate
As baby boomers reach retirement, advisers must solve new problems for clients. Retirement income is different as clients shift their focus from maximizing wealth to creating sustainable income; they face a greater range of risks, and increasingly must solve a complex lifetime problem. Key risks include longevity, market and the newly emergent sequence of returns risk, and spending shocks. Each risk requires different income tools and risk management techniques. Two distinct schools of thought have emerged within the retirement world: probability based approaches and safety first approaches. We consider how these can be combined to build more efficient retirement strategies.