LMP-1: P&I article on corporate & public pension plans

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grok87
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LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Thu Apr 20, 2017 8:40 pm

LMP-1: P&I article on corporate & public pension plans

LMP = Liability Matching Portfolio

This article from Pensions & Investments magazine discusses the diverging investment strategies of corporate pension plans vs public (ie municipal) pension plans.

http://m.pionline.com/article/20170417/ ... going-up/W

...
"Split on bonds: Corporate plans have increased their bond allocations as more have adopted LDI strategies, while public plans have lowered bond allocations, as the need for returns has led them to riskier asset classes."
...
note: LDI = Liability Driven Investments = LMP

So first of all, why should you care even if you don't have a defined benefit pension?

Well these pension plans have the same aim as us- to figure out how to invest to fund people's retirements. But they are going in different directions:

Corporate plans are choosing to adopt more of a liability matching portfolio (LMP) approach. They are buying more long term bonds, maybe buying inflation protection if those pensions have COLAs etc.
Bonds generally have lower expected returns but corporations are willing to live with that as they don't want the risk of their pension plans showing up at a bad time and messing up their quarterly earnings.

Municipal plans are going the other way, doing less liability matching investing (bonds) and investing more in equities and alternatives.

So what's your retirement investing strategy?

Are you doing more LMP like the corporate pension plans? Or taking more risk like the municipal pension plans? Or staying the course?
Frodo: I wish it need'nt have happened in my time. Gandalf: So do all who live to see such times. But that isn't for them to decide. All we have to decide is what to do with the time that is given us.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby Grt2bOutdoors » Thu Apr 20, 2017 8:47 pm

Staying the course. I am not willing to take more risk for questionable returns. There is saying "more money has been lost reaching for yield than at point of a gun" - insert "return" for yield. The public pension funds find themselves between a rock and a hard place, they should have thought about before they signed those contracts.
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Re: LMP-1: P&I article on corporate & public pension plans

Postby Angst » Thu Apr 20, 2017 9:33 pm

Gee... well, bonds are generally for safety, and equity is for risk, and hopefully return. One is safe and conservative, and one is risky and aggressive. Personally, I go for 15% of this, and 85% of that, thank you... but as far as my pension goes, I just want the result, i.e. the guarantee. I'd prefer to see my employer investing in bonds, not equity. But they want to make the math work.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby Doc » Fri Apr 21, 2017 6:37 am

Angst wrote:Gee... well, bonds are generally for safety, and equity is for risk, and hopefully return. One is safe and conservative, and one is risky and aggressive. Personally, I go for 15% of this, and 85% of that, thank you... but as far as my pension goes, I just want the result, i.e. the guarantee. I'd prefer to see my employer investing in bonds, not equity. But they want to make the math work.

If a corporate pension plan needs added contributions the company will put in more money to keep it solvent. The public pension plan is more likely to cut benefits. Employee's morale vs taxpayers rath.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Fri Apr 21, 2017 7:17 am

Grt2bOutdoors wrote:Staying the course. I am not willing to take more risk for questionable returns. There is saying "more money has been lost reaching for yield than at point of a gun" - insert "return" for yield. The public pension funds find themselves between a rock and a hard place, they should have thought about before they signed those contracts.


Thanks.
For me it's always a balance between ability, need and willingness to take risk.
I'm aiming to replace 40% of my current income wirh a LMP of social security, long-term tips and i-bonds.
The rest is in a Swensen-like risk portfolio (RP) of 50% equities, 25% real-estate/Alts, 25% intermediate treasuries.
Frodo: I wish it need'nt have happened in my time. Gandalf: So do all who live to see such times. But that isn't for them to decide. All we have to decide is what to do with the time that is given us.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Sat Apr 22, 2017 7:25 am

Angst wrote:Gee... well, bonds are generally for safety, and equity is for risk, and hopefully return. One is safe and conservative, and one is risky and aggressive. Personally, I go for 15% of this, and 85% of that, thank you... but as far as my pension goes, I just want the result, i.e. the guarantee. I'd prefer to see my employer investing in bonds, not equity. But they want to make the math work.


You're lucky to have a pension. I'm basically trying to recreate that with my liability matching portfolio strategy (LMP).
Frodo: I wish it need'nt have happened in my time. Gandalf: So do all who live to see such times. But that isn't for them to decide. All we have to decide is what to do with the time that is given us.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby Angst » Sat Apr 22, 2017 7:37 am

grok87 wrote:You're lucky to have a pension. I'm basically trying to recreate that with my liability matching portfolio strategy (LMP).

It's small - SS is more significant for me, but I'll take what I can get. And between the two of them, and my small (but still growing) LMP built mostly with 30 year TIPS, my expected minimum expenses will be covered. As such, I'm dedicating most (about 85%) of my portfolio to equity, largely SCV.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Sat Apr 22, 2017 7:52 am

Angst wrote:
grok87 wrote:You're lucky to have a pension. I'm basically trying to recreate that with my liability matching portfolio strategy (LMP).

It's small - SS is more significant for me, but I'll take what I can get. And between the two of them, and my small (but still growing) LMP built mostly with 30 year TIPS, my expected minimum expenses will be covered. As such, I'm dedicating most (about 85%) of my portfolio to equity, largely SCV.

THat makes a lot of sense to me.

Re the SCV, So i used to tilt heavily to Small cap value as well. But William Bernstein's book on "Deep Risk" caused me to rethink that a bit. My belief is that small cap value should do well in times of unexpected inflation but perhaps do poorly in a depression/deflation scenario. (ken french's dataset seems to show this is what happened in the 30s and 70s for example.)

So i decided that with my SCV tilt and TIPS i was well positioned for a stagflation scenario but less well positioned for depression/deflation scenario.
These days my stocks are mostly in Total Stock market and total international stock market. If i had the tax-advantaged space i would tilt more to the vanguard minimum volatility fund (VMNVX) which i believe invests in less leveraged companies that would perhaps do better in a deflation scenario.

cheers,
grok
Frodo: I wish it need'nt have happened in my time. Gandalf: So do all who live to see such times. But that isn't for them to decide. All we have to decide is what to do with the time that is given us.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby peppers » Sat Apr 22, 2017 8:25 am

We will have one corporate pension and one public pension. Currently the corporate pension gets a one percent annual increase and the public pension gets a three percent annual increase. Our retirement portfolio is about 45/55 equity to fixed income with contributions going 50/50 into total stock market fund and intermediate investment grade bond fund. We are still working and will claim SS at some point. Our ages are 65 and 63.
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Re: LMP-1: P&I article on corporate & public pension plans

Postby Angst » Sat Apr 22, 2017 8:56 am

^Thank you grok. I appreciate your insight very much as the extent of my SCV tilt is still a work in progress, especially given that I have the luxury of still being in the workforce and adding to savings and steering contributions here or there. I'm trying to settle in on the right balance btw TSM (both US & INTL) and SCV - i.e., something I feel is both rational and something I'm ready to stick with. The best part of it all though is that floor comprised of SS, pension and the TIPS LMP. It's my rock, my foundation. :happy

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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Sat Apr 22, 2017 6:38 pm

Doc wrote:
Angst wrote:Gee... well, bonds are generally for safety, and equity is for risk, and hopefully return. One is safe and conservative, and one is risky and aggressive. Personally, I go for 15% of this, and 85% of that, thank you... but as far as my pension goes, I just want the result, i.e. the guarantee. I'd prefer to see my employer investing in bonds, not equity. But they want to make the math work.

If a corporate pension plan needs added contributions the company will put in more money to keep it solvent. The public pension plan is more likely to cut benefits. Employee's morale vs taxpayers rath.

Good point.

the lesson for me is that we as individual investors saving for retirement are more like corporate pension plans. faced with having to make up shortfalls out of future earnings that may or may not be there, the rational thing is to favor liability matching strategies (LMP).
Frodo: I wish it need'nt have happened in my time. Gandalf: So do all who live to see such times. But that isn't for them to decide. All we have to decide is what to do with the time that is given us.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Sun Apr 23, 2017 3:51 pm

peppers wrote:We will have one corporate pension and one public pension. Currently the corporate pension gets a one percent annual increase and the public pension gets a three percent annual increase. Our retirement portfolio is about 45/55 equity to fixed income with contributions going 50/50 into total stock market fund and intermediate investment grade bond fund. We are still working and will claim SS at some point. Our ages are 65 and 63.

thanks

you are lucky to have pensions. My liability matching portfolio is aimed at replicating a pension since i don't have one.
Frodo: I wish it need'nt have happened in my time. Gandalf: So do all who live to see such times. But that isn't for them to decide. All we have to decide is what to do with the time that is given us.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby bobcat2 » Sun Apr 23, 2017 5:15 pm

grok87 wrote:LMP-1: P&I article on corporate & public pension plans

LMP = Liability Matching Portfolio

Split on bonds: Corporate plans have increased their bond allocations as more have adopted LDI strategies, while public plans have lowered bond allocations, as the need for returns has led them to riskier asset classes.

note: LDI = Liability Driven Investments = LMP


note: LDI LMP
While they have some similarities, LDI and LMP are not the same. Basically, LMP is a limited subset of LDI.

Here are some differences. LDI, as noted in the quote, is an investing strategy, not a portfolio. In an LDI strategy the investor as they approach retirement and during retirement duration matches at least part of the portfolio's assets to the duration of the liabilities in order to hedge interest rate risk. Pensions following an LDI strategy also duration match as do insurance companies when funding life annuities. These days pension funds often hedge interest rate risk not only with duration matching, but also with derivative contracts, often using swaps.

Rarely does someone advocating using an LMP duration match. For instance I have never read anything by William Bernstein, the chief proponent of LMP, where he duration matches assets to liabilities prior to retirement. See the following quote and linked article by Bernstein where he discusses LMP.
A more prudent course of action might be to hold standard Treasury securities and high-quality municipal and corporate bonds of short maturity in lieu of purchasing either an annuity or TIPS.

Link - https://www.wsj.com/articles/how-to-think-about-risk-in-retirement-1417408070

No one following an LDI strategy would use use short-term bonds to fund a long-term liability, regardless of whether interest rates are currently low or not. The duration mismatch of such an approach negates the safety of the approach.

At best LMP is a crippled limited offspring of general liability driven investing strategies.

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Last edited by bobcat2 on Sun Apr 23, 2017 5:20 pm, edited 1 time in total.
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Re: LMP-1: P&I article on corporate & public pension plans

Postby Doc » Sun Apr 23, 2017 5:20 pm

grok87 wrote:My liability matching portfolio is aimed at replicating a pension since i don't have one

I always wondered why you would want to fund a 30 yr LMP with real yields at rock bottom instead of taking more risk until yields improved. Now I know. :sharebeer
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Re: LMP-1: P&I article on corporate & public pension plans

Postby bobcat2 » Sun Apr 23, 2017 5:35 pm

Another key difference between LDI and LMP is that LDI strategies, whether public pensions, corporate pensions, or an individual planning retirement by allocating assets in a DC plan, use the funded ratio as a key metric. OTOH when people advocate developing an LMP, the funded ratio is at best an after thought. For example, in William Bernstein's book about life-cycle finance, The Ages of the Investor: A Critical Look at Life-cycle Investing, LMP is discussed at length, but I can't find one mention of the funded ratio.

Compare Bernstein's not mentioning the funded ratio with the following table by Robert Merton, an advocate of LDI retirement strategies for individuals. As you can see from the table, the goal-based retirement strategy Merton favors (an LDI strategy) emphasizes the funding ratio metric in driving the entire investment strategy.

Goal Based Investing focused on what matters most: Income

Investments

Code: Select all

Planning Process                      Conventional Retirement               Goal-Based Retirement                                                       
                                                                     
Investment Goal                      Wealth accumulation                    Retirement Income
                                     (No specified wealth Goal)             (Specified desired income goal)

Risk Measure                         Volatility of portfolio returns        Volatility of funded ratio(FR) 

Success Measure                      Account balance size                   FR relative to income goal

Asset allocation strategy            Generic Fixed or age-only              Dynamic based on age,income & FR-focused                                                                              on improving FR                 


This again gets back to duration matching, because maximizing the probability of a funded ratio of 1.00 or greater at retirement and during retirement involves duration matching.

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Last edited by bobcat2 on Sun Apr 23, 2017 6:03 pm, edited 2 times in total.
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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Sun Apr 23, 2017 5:49 pm

Doc wrote:
grok87 wrote:My liability matching portfolio is aimed at replicating a pension since i don't have one

I always wondered why you would want to fund a 30 yr LMP with real yields at rock bottom instead of taking more risk until yields improved. Now I know. :sharebeer

thanks
:sharebeer
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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Sun Apr 23, 2017 6:18 pm

bobcat2 wrote:
Rarely does someone advocating using an LMP duration match. For instance I have never read anything by William Bernstein, the chief proponent of LMP, where he duration matches assets to liabilities prior to retirement. See the following quote and linked article by Bernstein where he discusses LMP.
A more prudent course of action might be to hold standard Treasury securities and high-quality municipal and corporate bonds of short maturity in lieu of purchasing either an annuity or TIPS.

Link - https://www.wsj.com/articles/how-to-think-about-risk-in-retirement-1417408070

No one following an LDI strategy would use use short-term bonds to fund a long-term liability, regardless of whether interest rates are currently low or not. The duration mismatch of such an approach negates the safety of the approach.


Thanks Bob.
I guess this is the quote i focus on from the article
William Bernstein wrote:The key point is that all three choices—an inflation-adjusted annuity, TIPS ladder or short-bond portfolio—or any combination of them would match the retiree’s annual needs well, because they all provide a known stream of income and principal over the years. A portfolio starting at 60% bonds and 40% stocks with a subsequent glide path away from equities most certainly doesn’t provide that assurance.


I think you have a good point. William Bernstein doesn't mention, if one goes with the TIPs ladder approach, over what time frame one might build it. I wonder if we could get him to chime in here somehow?

He does seem to suggest, as you state, that he is not enthusiastic about purchasing either a inflation adjusted annuity or a TIPS ladder right now with interest rates so low (although the article was written in 2014 and rates are fractionally higher now). But i wonder if he might be sympathetic to the approach i follow and advocate- purchasing the TIPS ladder gradually over say a 20 or 30 year period- buying one rung each year as it were?
That way you are mitigating the risk of buying at a bad time.

cheers,
grok
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Re: LMP-1: P&I article on corporate & public pension plans

Postby learning_head » Mon Apr 24, 2017 12:58 pm

William Bernstein wrote:The key point is that all three choices—an inflation-adjusted annuity, TIPS ladder or short-bond portfolio—or any combination of them would match the retiree’s annual needs well, because they all provide a known stream of income and principal over the years. A portfolio starting at 60% bonds and 40% stocks with a subsequent glide path away from equities most certainly doesn’t provide that assurance.


Bill Bernstein highlights COLA-d annuity company risk and TIPS ladder reinvestment risk (as well as need for large tax-advantaged space), but I did not know he believes short-bond portfolio of "high-quality municipal and corporate bonds" provides assurance of inflation-protection that is very close to those two, while saying 60/40 portfolio does not.

It certainly seems much easier to invest in short-term AAA corporate bonds than bother with TIPS ladders or give up annuity premium. Does it really provide nearly as much assurance of the real income stream though?! I would not have thought so. Real income of TIPS is assured by US government. Real income of COLA-d annuities are assured by insurance company + state guarantee association. What assures real income of short term corp bond funds? Are the guarantees of purchasing power protection really similar in this case?

Perhaps what he means is that while risks of company failure + state guarantee failure for annuities and reinvestment risks for TIPS are different, they are comparable in their risks with short term AAA bond investments neither being guaranteed nor keeping up with same level of inflation protection? Further, 60/40 portfolio has much less ability (i.e. much more risk) in providing that level of inflation protection?

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Re: LMP-1: P&I article on corporate & public pension plans

Postby bobcat2 » Mon Apr 24, 2017 2:36 pm

learning_head wrote:
William Bernstein wrote:The key point is that all three choices—an inflation-adjusted annuity, TIPS ladder or short-bond portfolio—or any combination of them would match the retiree’s annual needs well, because they all provide a known stream of income and principal over the years.


It certainly seems much easier to invest in short-term AAA corporate bonds than bother with TIPS ladders or give up annuity premium. Does it really provide nearly as much assurance of the real income stream though?! I would not have thought so. Real income of TIPS is assured by US government. Real income of COLA-d annuities are assured by insurance company + state guarantee association. What assures real income of short term corp bond funds? Are the guarantees of purchasing power protection really similar in this case?


What assures real income of short term corp bond funds?
Nothing.

Are the guarantees of purchasing power protection really similar in this case?
No.

BobK
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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Mon Apr 24, 2017 5:12 pm

learning_head wrote:
William Bernstein wrote:The key point is that all three choices—an inflation-adjusted annuity, TIPS ladder or short-bond portfolio—or any combination of them would match the retiree’s annual needs well, because they all provide a known stream of income and principal over the years. A portfolio starting at 60% bonds and 40% stocks with a subsequent glide path away from equities most certainly doesn’t provide that assurance.


Bill Bernstein highlights COLA-d annuity company risk and TIPS ladder reinvestment risk (as well as need for large tax-advantaged space), but I did not know he believes short-bond portfolio of "high-quality municipal and corporate bonds" provides assurance of inflation-protection that is very close to those two, while saying 60/40 portfolio does not.

It certainly seems much easier to invest in short-term AAA corporate bonds than bother with TIPS ladders or give up annuity premium. Does it really provide nearly as much assurance of the real income stream though?! I would not have thought so. Real income of TIPS is assured by US government. Real income of COLA-d annuities are assured by insurance company + state guarantee association. What assures real income of short term corp bond funds? Are the guarantees of purchasing power protection really similar in this case?

Perhaps what he means is that while risks of company failure + state guarantee failure for annuities and reinvestment risks for TIPS are different, they are comparable in their risks with short term AAA bond investments neither being guaranteed nor keeping up with same level of inflation protection? Further, 60/40 portfolio has much less ability (i.e. much more risk) in providing that level of inflation protection?

I'm not sure i understand why a tips ladder has reinvestment riSk?

I don't there is any in the distribution phase. I guess there is some in the building phase. But with real yields so low i think the risk is pretty minimal.
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Re: LMP-1: P&I article on corporate & public pension plans

Postby learning_head » Mon Apr 24, 2017 7:18 pm

grok87 wrote:I'm not sure i understand why a tips ladder has reinvestment riSk?


I imagine it means this for someone who needs to assure real income for over 30 years:

(a) it's not clear what TIPS products will exist in 30 years when you may need to reinvest proceeds for years beyond; i.e.
--- at what maturities will they be sold, and more importantly,
--- at which rates? Nothing stops TIPS going to negative real rates. Especially if are in the middle of an inflation spike just as you need to reinvest.

(b) It's never clear how long you are going to live; so if you are planning for 40-50 or even 60 year time horizons (yes, if retiring in early 40s), how much TIPS do you buy? One option is to buy say 20x required income for years beyond 70+ and then buy an SPIA, or better yet, COLA-d SPIA, with those TIPS maturing in 30 years for the rest of life. However, what annuity type products will exist in 30 years (e.g. today we have only 1 COLA SPIA provider) and at which prices (again, pricier than 20x implicitly assumes?)? I suppose you could buy 30x required income for another TIPS ladder then (or build it gradually again over time), but that quickly becomes too expensive as you are over-insuring and not getting any benefit of mortality credits had you pooled longevity risk.

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Re: LMP-1: P&I article on corporate & public pension plans

Postby Dottie57 » Mon Apr 24, 2017 8:16 pm

I have a very bare minimum of cds and cash set up for age 65 to 70. I figure I can take 10k per year out of deferred accounts even if the market is down. In roth and taxable I have about the same in bonds and stocks(50/50) for 5 years before 65. So I think this comes close to matching my needs for the first 1/3 of retirement. Not a great life but survivable if the financial system doesn't collapse. ((Portfolio today is about 1.25m).

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Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Mon Apr 24, 2017 9:34 pm

learning_head wrote:
grok87 wrote:I'm not sure i understand why a tips ladder has reinvestment riSk?


I imagine it means this for someone who needs to assure real income for over 30 years:

(a) it's not clear what TIPS products will exist in 30 years when you may need to reinvest proceeds for years beyond; i.e.
--- at what maturities will they be sold, and more importantly,
--- at which rates? Nothing stops TIPS going to negative real rates. Especially if are in the middle of an inflation spike just as you need to reinvest.

(b) It's never clear how long you are going to live; so if you are planning for 40-50 or even 60 year time horizons (yes, if retiring in early 40s), how much TIPS do you buy? One option is to buy say 20x required income for years beyond 70+ and then buy an SPIA, or better yet, COLA-d SPIA, with those TIPS maturing in 30 years for the rest of life. However, what annuity type products will exist in 30 years (e.g. today we have only 1 COLA SPIA provider) and at which prices (again, pricier than 20x implicitly assumes?)? I suppose you could buy 30x required income for another TIPS ladder then (or build it gradually again over time), but that quickly becomes too expensive as you are over-insuring and not getting any benefit of mortality credits had you pooled longevity risk.

i agree that if you have a longer than 30 year time horizon then reinvestment risk is an issue. I guess the mental picture i had was that most people would keep building their tips ladder up until age 65 or so and then live off the tips ladder for 30 years until age 95.

as you say though "its never clear how long you are going to live." somewhere in your 80s i guess is probably the time to start buying a deferred annuity that kicks in at age 95.
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Re: LMP-1: P&I article on corporate & public pension plans

Postby AlohaJoe » Mon Apr 24, 2017 9:43 pm

grok87 wrote:I'm not sure i understand why a tips ladder has reinvestment riSk?

I don't there is any in the distribution phase. I guess there is some in the building phase. But with real yields so low i think the risk is pretty minimal.


I'm not sure what the original person who said this meant. Beyond the previous suggestions but to elaborate on your "some in the building phase comment" here are two possibilities:

You can't actually buy a 30-year TIPS ladder. There are missing years.

Go to http://eyebonds.info/downloads/pages/TIPSLadder.html

There is nothing maturing in 2023, 2024, 2031, 2032, 2033, 2034, 2035, 2036, 2037, 2038, and 2039.

So you need to buy a shorter TIPS now and then buy another shorter one ladder. Hence: reinvestment risk.

Another possibility is that you can't start building a ladder until you are exactly 30 years away from retirement. (If your retirement date changes at all over those 30 years then you are also subject to reinvestment risk.)

That means (as an example) that you can't start building the ladder until you are 37 years old. You can buy a shorter TIPS and then reinvest it once you are 37 or older. That means, for most people, you have 17 years of reinvestment risk. Of your entire 47 year investment life, 36% of it you are subject to reinvestment risk.

grok87
Posts: 7265
Joined: Tue Feb 27, 2007 9:00 pm

Re: LMP-1: P&I article on corporate & public pension plans

Postby grok87 » Tue Apr 25, 2017 7:06 am

AlohaJoe wrote:
grok87 wrote:I'm not sure i understand why a tips ladder has reinvestment riSk?

I don't there is any in the distribution phase. I guess there is some in the building phase. But with real yields so low i think the risk is pretty minimal.


I'm not sure what the original person who said this meant. Beyond the previous suggestions but to elaborate on your "some in the building phase comment" here are two possibilities:

You can't actually buy a 30-year TIPS ladder. There are missing years.

Go to http://eyebonds.info/downloads/pages/TIPSLadder.html

There is nothing maturing in 2023, 2024, 2031, 2032, 2033, 2034, 2035, 2036, 2037, 2038, and 2039.

So you need to buy a shorter TIPS now and then buy another shorter one ladder. Hence: reinvestment risk.

Another possibility is that you can't start building a ladder until you are exactly 30 years away from retirement. (If your retirement date changes at all over those 30 years then you are also subject to reinvestment risk.)

That means (as an example) that you can't start building the ladder until you are 37 years old. You can buy a shorter TIPS and then reinvest it once you are 37 or older. That means, for most people, you have 17 years of reinvestment risk. Of your entire 47 year investment life, 36% of it you are subject to reinvestment risk.

Thanks.

So i have some good news. Tips maturing in 2023, 2024 and 2032 are available.

It sure would be nice to have 2033-2039 available. Maybe someone will strip the 2040s tips issues some day?
Frodo: I wish it need'nt have happened in my time. Gandalf: So do all who live to see such times. But that isn't for them to decide. All we have to decide is what to do with the time that is given us.

learning_head
Posts: 706
Joined: Sat Apr 10, 2010 6:02 pm

Re: LMP-1: P&I article on corporate & public pension plans

Postby learning_head » Tue Apr 25, 2017 11:04 am

grok87 wrote:... as you say though "its never clear how long you are going to live." somewhere in your 80s i guess is probably the time to start buying a deferred annuity that kicks in at age 95.


(As you also noted in the past) today at least, deferred annuities provide no meaningful inflation protection unfortunately, so one would have have no idea how much of real future income they are buying. :(


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