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DISCUSSION PAPER PI-0105

Retirement Investing: A New Approach

Zvi Bodie

ABSTRACT

This paper proposes a new approach to investing for retirememt that takes
advantage of recent market innovations and advances in finance theory to
improve the risk/reward opportunities available to individual investors before
and after retirement. The approach introduces three new elements:

• It uses inflation-protected bonds to hedge a minimum standard of living after retirement.
• It takes account of a person's willingness to postpone retirement.
• It uses option "ladders" to lever growth in retirement income.