In Focus

October 23, 2006

lanning strategies for distributing (as opposed to accumulating) retirement assets are the rage, as Baby Boomers reach retirement age.

Unfortunately, while Baby Boomers need to know if they can retire, how much they can spend, and whether they will outlive their retirement assets, far too often we meet (and prosecute cases for) individuals who retired too soon, on promises of unreasonably high and consistent investment returns coupled with unrealistic withdrawal rates, without sufficient regard for the volatility of the markets, inflation and the sequence of investment returns.

That is why I was delighted to learn that one investment firm (Wachovia Securities) has unveiled what truly may be a valuable retirement planning tool. According to press coverage, Envision will answer the most pressing question -- whether or not a retiree has enough money to retire. To do so, Envision will take advantage of "Monte Carlo" simulations to predict the odds of a successful retirement. A typical Monte Carlo analysis runs thousands of random statistical simulations in various market environments to produce a range of probable portfolio outcomes. On the basis of these probable portfolio outcomes, real retirement planning can occur, both in terms of the types of investments that are suitable and the rate of withdrawals that the portfolio can withstand without fear of running out of money.

What I like even more about Envision is its automatic updating of those retirement plans on a monthly basis. The system can and will react to changes in the markets by providing real-time information to advisers about how such changes are impacting the retirement plans of their clients. Surely other investment firms will follow Wachovia's lead in developing similar technology.

Put another way, Envision sets a standard of care for prudent management of retirement portfolios. Investors at Wachovia and elsewhere should rejoice because they now can expect their advisers to take advantage of technology to frequently communicate with them, constantly monitor their investment portfolios and rebalance them when necessary or desirable.

_______________________________________________________________________
James J. Eccleston is a securities attorney, representing customers as well as brokers and brokerage firms nationwide in arbitration, litigation and regulatory matters. He maintains an informative website at www.FinancialCounsel.com. He is an equity partner with Shaheen, Novoselsky, Staat, Filipowski & Eccleston, and can be reached at 312-621-4400.