How We Protect Retirees from Market Volatility

Genevieve Signoret

(Hay una versión en español de este artículo aquí.)

Some of our clients are retired, so draw income from their portfolios. For them, we set up bond ladders to cover their projected expenditure requirements needs for the next 3–7 years and leave the rest of their capital chiefly in stocks.

The more capital clients have (the more they saved during their working years), the longer we can make the bond ladder. The longer the bond ladder, the fiercer the protection.

Each “rung” of a bond ladder is a group of bonds that mature just in time to cover 100% of a client’s upcoming expenditure needs. This prevents our having to sell any stocks to supply client income during market downturns.

When the stock market performs well, we take profits from their stock portfolio to replace missing rungs in the bond ladder. When it does not, we defer that step till the stock market has rebounded sufficiently.

During their working years, clients work hard and live below their means in order to save for retirement. Retirement, then, is a culminating event. Perhaps this is why, among the array of tools we have for delivering serenity, bond ladders are the one that stirs in us the most profound sense of satisfaction.