UBS Wealth Management Research Publishes New Report: Retirement Planning Now - "Risk: How Much is Enough?"

UBS Wealth Management Research -- Americas, in collaboration with other UBS business groups, today issued its latest report: "Risk: How much is enough?" The report examines the topic of financial risk and its crucial role in helping investors to narrow the gap between the current values of their assets and the amount necessary to meet their goals during retirement.

In addition to more traditional approaches, UBS presents a nontraditional investment strategy for retirement planning, where investors match specific segments of their portfolios to clearly defined objectives, which reflect their different needs, wants and wishes.

While the global financial crisis has started to abate, for many investors, especially those nearing retirement, the fallout has resulted in an imbalance between the current values of their assets and how much they will need to meet their projected retirement needs. The question for investors is, "How do you close this retirement gap?" As a result, investors face difficult choices as they relate to the three dimensions of retirement planning: increasing savings, adjusting risk and resetting goals.

In the past, the traditional investment planning strategy to restore balance to a retirement portfolio involved examining the retirement "trilemma," which includes boosting savings (working longer), scaling back goals and reassessing the investor's risk appetite.

In this new approach, as outlined by UBS, investors should segment their portfolio to help them identify how much financial risk they need to take in order to meet their retirement goals.

While this process won't painlessly solve the retirement "trilemma," it can empower investors who otherwise might avoid risk altogether. The strategy presented in the report allows an investor to manage their potential losses to an acceptable level while retaining the prospect of achieving key goals.
With this in mind, UBS suggests the following "buckets" in planning for retirement:


• The first risk bucket should contain funds required to fulfill the liquidity needs for an individual over some predefined time horizon. The sole purpose of this bucket is to provide an investor with a level of security in any contingency.

• The core bucket contains the bulk of an individual's assets and should reflect the investor's risk preference and be positioned for the maximum return versus risk. It is important this bucket is viewed within the context of an investor's total assets.

• The leverage bucket contains a mix of riskier assets that should be used as a risk overlay and offers the investor the opportunity to dial up or dial down their risk tolerance.


"The benefits of a segmented approach are found not so much in characteristics of the portfolios, but the ability to construct a portfolio that addresses the investor's loss aversion concerns, while at the same time allowing enough financial risk-taking to meet the investor's goals," said Mike Ryan, Head Wealth Management Research -- Americas.

The risk overlay strategy, provided in the third bucket, offers some probability that investors will be able to at least partially realize their wishes (such as travel or a second home), while at the same time helping to narrow the retirement gap.

For example, using this investment strategy, investors who lower their spending objectives in retirement and transfer the difference to riskier assets might find themselves taking only a slight reduction in their immediate liquidity while availing themselves of greater upside potential.

"It is important to note that this strategy isn't for everyone and will not eliminate financial risk from a portfolio," said Ryan. "However, coupled with sound investment advice, this approach provides advantages for those investors seeking to limit overall downside risk, while still attempting to achieve a certain set of goals."

For more information and to download the report, go to www.ubs.com/retirementplanning.




About UBS

Headquartered in Zurich and Basel, Switzerland, UBS is one of the world's leading financial firms. It serves a discerning, international client base with its wealth management, investment banking and asset management businesses. In Switzerland, UBS is the market leader in retail and commercial banking.

UBS is present in all major financial centers worldwide. It has offices in over 50 countries, with about 38% of its employees working in the Americas, 34% in Switzerland, 15% in the rest of Europe and 13% in Asia Pacific. UBS employs more than 70,000 people around the world. Its shares are listed on the SIX Swiss Exchange, the New York Stock Exchange (NYSE) and the Tokyo Stock Exchange (TSE).