I appreciate this may be a silly question but when we’re looking at time horizons do we consider the time left until retirement, or the time left until they die?
Just to make things clearer I’ll give an example. Let’s say you have an individual aged 45 with an investment portfolio who’s looking to retire in 5 years at the age of 50.
Would there investment time horizon be 5 years (i.e. from age 45 up until they retire) or would it be up until they die (so in this example probably c. 30 years)?
I believe it’s the latter right, because they’ll rely on the portfolio after retirement until they die?
I think I’ve heard contrasting statements so just wanted to clarify
Thanks
As far as I am concerned it would be until death… as for your concrete example it would be a 2 stage time horizon - 5 yrs until retirement, and retirement period starting in 5 yrs and lasting till death.
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Thanks dude, I thought as much
Until they die.
They don’t plan to stop investing when they retire. I presume.
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How about if before retirement they have an annual salary of $400,000 and after retirement, it is only $150,000. Of course, they still need to support their annual expenses, let’s say $300,000.
With these assumption, should we have two periods for the time horizon: one is 5 yrs until retirement, one is after retirement until death?
You would certainly have two stages to the time horizon.
A good rule of thumb is that any change that has a material effect on the portfolio should be a dividing point between stages.
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