This article in the Wall Street Journal presents an interesting take on 401(k) plan outflows. Usually, you read about investors taking money out of funds due to general market fears after extreme market volatility. This article points out that folks are distributing investable assets out of 401(k) plans relative to their contributions because the baby boomers are tipping the balance and beginning to retire. This really brings to light the next phase of investment challenges this group of investors will face – Retirement Income Planning.
In short, while you are accumulating assets, the name of the game is to maximize your expected return for a given level of expected risk. This manifests itself within an investment strategy as a diversified multiple asset class portfolio.
When you are taking portfolio distributions however, you want to maximize your expected return for a given level of income. This approach presents a new set of challenges (e.g., market sequence and longevity risk) and it will be interesting to see how they are addressed in the future.
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