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Recalibrating Retirement Spending and Saving$
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John Ameriks and Olivia S. Mitchell

Print publication date: 2008

Print ISBN-13: 9780199549108

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199549108.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 16 April 2021

Efficient Retirement Financial Strategies

Efficient Retirement Financial Strategies

(p.209) Chapter 9 Efficient Retirement Financial Strategies
Recalibrating Retirement Spending and Saving

William F. Sharpe

Jason S. Scott

John G. Watson

Oxford University Press

Today's retirees face the daunting task of determining appropriate investment and spending strategies for their accumulated savings. Financial economists have addressed their problem using an expected utility framework. In contrast, many financial advisors rely instead on rules of thumb. This chapter shows that some of the popular rules are inconsistent with expected utility maximization, since they subject retirees to avoidable, non-market risk. It also highlights the importance of earmarking ‘the existence of a one-to-one correspondence between investments and future spending’ and shows that a natural way to implement earmarking is to create a lockbox strategy.

Keywords:   retirement spending, longevity, early retirement, investment strategy, financial strategy, lockbox, rules of thumb, consumption rules, financial advisor, earmarking

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