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Informed Choice Radio - personal finance peace of mind with Martin Bamford


Mar 9, 2018

In this episode, I'm joined by Abraham Okusanya, author of a new book called Beyond The 4% Rule: The science of retirement portfolios that last a lifetime.

Regular (and loyal) listeners to this podcast will remember Abraham from episode 11, back in February 2015, and more recently in episode 114, in September 2016, when we spoke about 'brainless portfolios'.

Abraham is hosting a conference in London next week called The Science of Retirement, and he's just published a new book called Beyond The 4% Rule: The science of retirement portfolios that last a lifetime.

Before I share our conversation with you, here's the blurb from the book, to give you some context:

"Retirement income planning used to be so simple. Most people never had to worry about how to convert their retirement savings into income for the rest of their lives. Today's low annuity rates, closure of increasing numbers of defined benefit schemes and the Pension Freedoms, introduced by the UK Government in 2015, ripped up the retirement income planning rulebook.

"The book confronts the challenge of how to secure a sustainable income that lasts a lifetime from your portfolio. It delves into the detail of the various withdrawal strategies, asset allocation and the unavoidable question of how long before you pop your clogs. This book helps retirees and their advisers navigate the treacherous retirement income landscape, using sound empirical evidence and practical application."

The reason I wanted to chat to Abraham about his book was because we often refer to the 4% rule and it's become one of those throwaway financial rules of thumb, often mentioned without really digging into the details. As Abraham will explain in a moment, the rule is based on really robust science, but there's more to consider for individuals - in particular, the impact of fees, the underlying asset allocation and the assumption that retirement income will stay at the same level for the rest of life - spoiler alert, it doesn't!