Investing for Retirement Income

1 CE Credit | Paper (41 pages) and Two Articles

Dimensional takes an income-focused approach to retirement investing. It features a moderate allocation to equities in retirement and a substantial allocation to liability-driven investing (LDI) in fixed income. Taken together, these two elements help protect retirement investors from market, interest rate, and inflation risks. The paper seeks to quantify the benefits of an income-focused glide path by comparing its performance to conventional, wealth-focused glide paths that approximate conventional target date funds.

Learning Objectives

1. Review the basics of liability-driven investing in a retirement context.

2. Understand the costs and benefits of equity exposure under both fixed and flexible spending. 

3. Evaluate the tradeoffs between fixed and flexible spending.

4. Understand the impact of early-retirement negative shocks on the performance of wealth-focused and income-focused glide paths. (Negative shocks involve unexpected conditions such as poor stock market returns, high inflation, and low interest rates.)

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