When it comes to retirement income planning strategies, many people feel a bit uneasy with information overload. For many, there is simply too much data to process, so they leave it to the professionals to handle. Selecting the optimal retirement income planning strategy is difficult, mostly due to the measurement component. The measurement of what qualifies as the “best” becomes a meaningful task.
Approaches to Retirement Income Planning
One might evaluate retirement income planning by which strategy produces the most wealth. If this is the case, the best retirement strategy would be to spend little and invest for growth. Say the aim is to maximize retirement spending, the optimal strategy is investing in an aggressive manner to maximize portfolio growth that allows for future spending. However, portfolios with high growth also have the potential to be a bust. Therefore, one entering the golden years who are risk-averse might not be on board with this approach, even if it has the potential to significantly boost retirement spending.
Measuring Retirement Outcomes in Different Ways
The most common method is to project the amount of wealth that would build and compound across a retirement span of three decades. Cumulative spending can also serve as the basis for measuring retirement outcomes. Some believe the highest quality of life is achieved by spending the most amount of money possible. Nowadays, retirement investing strategies can be analyzed and modeled in thousands of ways to gauge the probability of success. Retirement outcomes can also be measured according to the probability of success. Magnitudes of failure, adjustment, and risk aversion can be used to measure retirement outcomes.
Evaluate Potential Outcomes With Care
The moral here is to consider how retirement income strategies are measured before making your own assessments. The optimal retirement income planning strategy might differ based on whether one measures according to wealth, the ability to spend freely during retirement, the chance of success versus failure, and so on.