Hi All,
Just did a Kaplan Mock, does the return requirement increase or decrease in retirement.
I would think the return requirement would most likely decrease given the risk tolerance decreases?
Do they have a pension and were they drawing funds before retirement from their assets? Do their expenses drop in retirement? All things needed to figure out if it drops or not.
No detailed particulars given, assumed they have a retirement portfolio - just a theoretical question.
May just be a bad Kaplan question. This was from Kaplan 2017 Vol2 AM1 Mock.
My understanding is that return requirement increases in retirement because you no longer have income to supplement your portfolio. Risk therefore also goes down (noting that that’s a bit of a paradox).
Agreed. If proposed a similar question I would answer in that manner. But also state that in practice lower risk results in lower returns.