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Financial Plans for Baby Boomers: How Much Risk?

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  • Geoffrey Kingston

Abstract

In June 2008, the Financial Planning Association issued an “example” financial plan. The hypothetical clients are John and Joan, a married couple. The plan would reduce the couple’s tax bill from $38,000 to $22,941 per annum, a good outcome. More questionable is a recommendation that the percentage of financial assets invested in growth assets be raised to 70 per cent. An aggressive asset allocation could well suit if the couple were aged either 37 or 77, but John and Joan are 57. The long investment horizon faced by the couple is actually a reason for caution on the cusp of their retirement.

Suggested Citation

  • Geoffrey Kingston, 2009. "Financial Plans for Baby Boomers: How Much Risk?," Economic Papers, The Economic Society of Australia, vol. 28(2), pages 65-74, June.
    • Handle: RePEc:bla:econpa:v:28:y:2009:i:2:p:65-74
    DOI: 10.1111/j.1759-3441.2009.00018.x
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    References listed on IDEAS

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    1. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
    2. Farhi, Emmanuel & Panageas, Stavros, 2007. "Saving and investing for early retirement: A theoretical analysis," Journal of Financial Economics, Elsevier, vol. 83(1), pages 87-121, January.
    3. Milevsky, Moshe A. & Young, Virginia R., 2007. "Annuitization and asset allocation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 3138-3177, September.
    4. René M. Stulz, 1996. "Rethinking Risk Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 8-25, September.
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    Cited by:

    1. Geoffrey Kingston & Lance Fisher, 2014. "Down the Retirement Risk Zone with Gun and Camera," Economic Papers, The Economic Society of Australia, vol. 33(2), pages 153-162, June.
    2. Geoffrey Kingston, 2011. "Dracula in Charge of the Blood Bank," The Economic and Labour Relations Review, , vol. 22(3), pages 27-44, November.

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