Larry's Contributions to Retirement Research Body of Knowledge
"Research is seeing what everyone else has seen and thinking what nobody else has thought." Albert von Szent-Györgyi Nagyrapolt - Nobel Prize in Physiology or Medicine 1937
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Context for the Research Below
Many Americans are increasingly worried about being able to enjoy a reliable income stream in retirement. Especially with volatile markets, this is a real concern for anyone approaching or in retirement. Rising health costs, increasing longevity and potential tax increases just add to the worry and uncertainty.
While Wall Street has tried to design products to address the problem of reliable income in retirement, such as annuities or target date funds, these tend to be incomplete solutions with similar results expected in the future. Such a product focus is akin to a retiree of the 80’s or 90’s depending on a product designed then to protect them now. Even defined benefit plans are coming under strain today.
Instead, I believe investors should recognize that retirement income is a dynamic and ongoing process and thus should have appropriate rules in place to make proper decisions as economic and market changes occur. In addition, retirement income should be planned in reverse without attempting to make forward predictions.
Many people believe retirement planning is the act of saving in a 401k, IRA or Roth. That is how you accumulate retirement resources. In truth, retirement planning is more about how to live on those retirement resources without outliving them. Here is research that explains how to do that without products, but with indexing.
While these papers can be a bit on the technical side, they have important implications for how to invest for and in retirement. I'm pleased to contribute to the body of knowledge of the profession while I seek to solve these retirement problems for my own clientele.
I apply this and other related research directly to your retirement income planning, either in pre- or post-retirement.
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An Age-Based, Three Dimensional, Universal Distribution Model
Incorporating Sequence Risk
This research paper incorporates both probability of the portfolio (market risk) and probability of the person (longevity risk) for retirement de-cumulation. A method is shown to evaluate either a "consumption-oriented" retiree, or an "inheritance-oriented" retiree. Research by Larry R. Frank Sr., John B. Mitchell, David M. Blanchett.
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Sequence Risk: Managing Retiree Exposure to Sequence Risk Through Probability of Failure Based Decision Rules This paper develops Probability of Failure based decision rules that address negative market sequences for retirement de-cumulation. Research by Larry R. Frank Sr., John B. Mitchell, David M. Blanchett.
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Larry and his colleagues have co-authored papers published in one of the industry’s top peer reviewed journals, Journal of Financial Planning (home page) *
These papers discuss how a withdrawal rate may change dynamically over time as a person ages through retirement. This dynamic change is compared to static application of withdrawal rates that have subsequent inflation adjustments to the initial dollar value. The research also investigates market declines, and how sequence risk in the markets may be addressed in the future.
Linked, and cover photo, with permission by the Financial Planning Association, Journal of Financial Planning, November 2011, by Larry R Frank Sr, John B Mitchell, and David M. Blanchett.
Linked, and cover photo, with permission by the Financial Planning Association, Journal of Financial Planning, April 2009, by David M. Blanchett and Larry R Frank Sr.
The Journal of Financial Planning is published by the Financial Planning Association® (FPA®) and all information published within is the sole property of FPA.
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"In Search of Your Numbers" * is a white paper referenced in the above Journal of Financial Planning papers. This white paper establishes the background for a method to determine a target end date for withdrawal planning that can be used for both pre- and post-retirees retirement income planning. The objective is to establish a sustainable retirement income, with a low probability that you may outlive that retirement income, based on sound academic thought. This white paper also discusses the application of retirement withdrawal rates to the pre-retiree.
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Larry's book, "Wealth Odyssey," shows people what financial planning really is, which is beyond just investing. The book also defines wealth to show you how to use wealth to sustain your unique Standard of Individual Living. "Wealth Odyssey" shifts your focus from income-centric thinking to net worth, or wealth-centric thinking. With this subtle change in perspective, "Wealth Odyssey" shows how this helps you put all the financial planning components into better perspective to make smart decisions on your journey to your wealth and goals.
Wealth Odyssey is one of the many suggested resources by JumpStart to help young people learn about personal finance. Available to teachers, mentors and students, by title search in the JumpStart Clearinghouse. *
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