An important issue in retirement income planning is choosing and adjusting the retirement portfolio’s asset allocation over time. With retirement income planning, the goal is not just to accumulate wealth, but to have sufficient assets to meet income needs throughout retirement. In these three video interviews, Professor David Littell and Dr. Wade Pfau from The American College of Financial Services discuss three approaches to adjusting asset allocation: age based, valuation based, and funded basis approaches.
In the first video, “Age Based Asset Allocation Approaches,” Professor Littell and Dr. Pfau discuss the most common example of age based asset allocation approaches – target date funds (also known as life cycle asset allocation funds). In the second video interview, “Valuation Based Asset Allocation Approaches,” Dr. Pfau describes valuation based asset allocation models. He says they combat sequence of returns risk by reducing stock allocation when the stock market is deemed to be overvalued – typically when the largest stock market drops occur. Finally, in “Funded Ratio Asset Allocation Approach,” Professor Littell and Dr. Pfau go over the third method of asset allocation – the funded ratio asset allocation approach.
Read more about the video on The American College’s blog.