Moshe A. Milevsky - Pensionize Your Nest Egg: How to Use Product Allocation to Create a Guaranteed Income for Life

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Copyright 2015 by Moshe A. Milevsky and Alexandra C. Macqueen. All rights reserved.

PensionizeTM and PensionizationTM are trademarks of QWeMA Group Inc.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

The first edition was published by John Wiley & Sons, Inc. in 2010.

Published simultaneously in Canada.

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ISBN 9781119025252 (Hardcover)
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ISBN 9781119025276 (ePub)

The first edition of this book was published in 2010 and covered the Canadian market. We wrote it because we felt, both then and now, that Canadians preparing for retirement needed a clear and better understanding of both the risks they (and their finances) face, and how a true pension can help protect retirees from those risks. In the first edition, we provided some step-by-step guides on how to use the new approach of product allocation to protect against the new risks of retirement, and obtain a true pension.

As soon as that first (Canadian) edition was published, we started to get inquiries from prospective retirees in other countries asking how the tools and perspectives of pensionizing could help them, too. Our standard response, for several years, was, Just refer to the Canadian edition; the terms might be different, but the pension landscape and the math and concepts of pensionizing are pretty much the same.

We were wrong.

As it turns out, the need for pensionization in the United States, the United Kingdom, Australia, and New Zealand is much more acute than it ever has been in Canada. What we refer to as true pensionsemployer-provided, workplace pensions that provide a retirement paycheck to replace your workplace paycheck at retirement, for as long as you liveare more threatened and have experienced much more significant decline in these countries than in Canada and thats when theyve even been available at all.

At the same time, in the years since the publication of the first edition, successive waves of reform have transformed pension systems in all of these economiesand those transformations are not yet over.

For the past decade, pension reform has been high on the agenda of many governments; with the financial crisis, starting in 2008, only accelerating the pace of change. Pension observers around the world suggest that by now it is widely accepted in most countries that pension systems and rules need to change over time. However, how and where does that leave retirees, who must plan for a safe and secure retirement in an era of profound change, including the dramatic decline of workplace pensions and faltering economic markets?

This revised edition of Pensionize Your Nest Egg is our response to that question. Weve updated, expanded, and revised the materials inside to cover retirees in the United States, the United Kingdom, Canada, Australia, and New Zealand (a group that we refer to as our focus areas or focus regions). If you live in one of these places and youre thinking about retirement, this book is for you.

One note before you move forward: because weve covering five regions, there are times we use generic terms instead of country-specific terms. The most obvious instance is the use of dollars to refer to currency amounts throughout the bookinstead of the pound, for example. However, please note that none of our arguments are based on currency values. Where you see dollars, you can happily read that as pounds, if you like, in order to make it more personally relevant to you.

Were going to ask you to do a lot of speculating, imagining, forecasting, and projecting in this bookand were going to start now.

Were going to open this book with a fable about a hero on a daring quest.

Lets imagine that hero is you. Your quest is to survive a perilous journey while amassing enough gold pieces to sustain you for the rest of your life, once youve reached the journeys end.

So far, youve traveled many miles over sometimes treacherous ground, following the path through unexpected twists and turns. And youve been gathering gold pieces along the way, carefully storing them in what you hope are safe havens that you can access once your journey is over.

The good news is that the end of your journey is in sight. The bad news is that the danger is not over.

Three new risks have emerged from the shadows, standing between you and the caves where youve stored your gold. Lets get a closer look at them: theres the Dragon of Decaying Currencywill it cause your gold to lose its value over time? What about the dreaded Serpent of the Sequence of Returnswill it unexpectedly make off with half of your fortune? And, finally, does the Specter of Longevity Risk loom over you, rendering you paralyzed with worry about running out of gold while you are still alive?

This book is all about getting you past those mythical beastsand the very real risks they representto your ultimate goal: your safe and happy retirement, free from worry about having enough gold to last for the rest of your days.

In this book, were going to equip you with all kinds of tools, from special glasses to crafty calculators and more, and these will all help you along the way. But to get you to your goal, were going to give you a powerful shieldone that can vanquish the beasts weve just described while protecting your gold for as long as you live. That shield is pensionization.