In the ever-evolving world of financial planning, the conventional wisdom around portfolio construction has long revolved around total return—an approach that prioritizes maximizing returns through a mixture of stocks and bonds, often based on a client’s risk tolerance. At Branning Wealth Management, we believe that the financial landscape is growing more complex and retirees are increasingly looking for some predictability (bonds held to maturity) over performance. That is why we practice liability-driven investing (LDI) —a model that seeks to align a client’s financial goals with reliable streams of income to meet their anticipated future expenses.
We also believe LDI flips the traditional investment dialogue on its head. Rather than focusing on abstract percentages of stocks and bonds, it asks a more fundamental question: What cash flows will you need, and when? At that starting point, we seek to build a strategy designed to meet those liabilities in retirement—your living expenses, healthcare costs, travel goals, etc. —through assets that deliver income more predictably.
A Cash Flow-Focused Strategy
One of the best illustrations of liability-matching is the dedicated portfolio theory , a method that emphasizes allocating assets to match specific liabilities over time. In this model, a segment of the portfolio, often called the “Income Portfolio” is constructed using individual bonds held to maturity. These bonds are designed to generate predictable cash flows through interest payments and redemptions, providing income to cover known expenses in retirement for a set number of years (ideally 7- 10).
For example, if a retiree requires 5% of their portfolio annually for living expenses, an 8 year bond ladder would be funded with approximately 40% of the portfolio. The remaining 60%, the “Growth Portfolio,” is invested in equities or mutual funds. As each year passes, if the Growth Portfolio performs well, some of those gains are used to replenish the Income Portfolio with new bonds, maintaining that protected cash flow runway. If markets underperform, there’s no immediate pressure to sell, because the income needs are still met for several years to come. This allows us to not sell stocks when the markets are down. We’ve found that this approach helps clients avoid that impulse to sell low and buy low.
This approach doesn’t just bring structure—it brings peace of mind. Retirees know their short and medium-term expenses are covered, which can reduce the emotional impact of market volatility. When you’re not forced to sell investments at a loss during a downturn, you can let your long-term investments recover. Historically, markets have always bounced back given enough time. LDI allows retirees to weather storms with confidence.
A More Meaningful Definition of Risk
One of the key advantages of LDI is how it reframes the concept of risk. Traditional investing often begins with a risk tolerance questionnaire, which can be subjective and situational. But LDI takes a more practical approach: rather than ask how much loss you can stomach, it focuses on how securely your future liabilities are matched. In this way, risk is defined not by market swings, but by the failure to meet expected expenses when they arise. At Branning Wealth Management, we believe this is a more grounded and relevant definition for retirees seeking stability in retirement.
Bridging the Financial Knowledge Gap
At our firm, we understand that in times of leadership changes, tariffs, and wars, financial jargon and market noise can be overwhelming. Therefore, from the moment a client walks in, we aim to clarify goals, explain our planning process, and illustrate how their portfolio is designed to meet those goals based on historical research going back to the “Great Depression”. We believe in the philosophy of “trust, but verify”—inviting clients to ask questions and truly understand what’s being proposed.
We also equip our clients with resources that demystify LDI. The book Asset Dedication —co-authored by our colleagues Professor Stephen Huxley and Brent Burns—breaks down the theory and application of dedicated portfolio strategies in clear terms. Jason Branning, our firm founder has further built on this with the development of MRT® (Modern Retirement Theory), a “safety-first” approach that pairs naturally with the LDI philosophy, offering a robust framework for retirement income planning.
Through monthly blogs, newsletters, and one-on-one conversations, we work to close the gap between what clients know and what they need to know to make informed, confident decisions.
Planning with Purpose
Liability-driven investing is not a trend—it’s a shift in perspective. It’s about meeting needs, not chasing returns. By matching your income to your actual expenses and building in a buffer against market volatility, LDI offers a plan rooted in clarity, control, and confidence. For anyone preparing for retirement, it’s time to consider not just how much you’re earning, but how well your portfolio is aligned with the life you want to live.
If you’re interested in matching your income to your expenses in retirement, we can help you explore if this strategy adds deeper meaning to your financial plan, get in touch with our team at Branning Wealth Management today.
By: Kelly Jennings, CFP®, CDAA
Disclaimer: This newsletter is distributed for general informational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. No part of this newsletter nor the links contained therein is a solicitation or offer to sell investment advisory services except where applicable in states where we are registered or where an exemption or exclusion from such registration exists.
Information throughout this newsletter is obtained from sources that we believe reliable, but we do not warrant or guarantee the timeliness, accuracy, or completeness of this information, and the information presented should not be relied upon as such.
The investment return and principal value of an investment will fluctuate. All investments involve risk of loss, including the possible loss of all amounts invested, and nothing within this newsletter should be construed as a guarantee of any specific outcome or profit. This newsletter may not be reproduced or redistributed in whole or in part.
Any opinions expressed herein are those of the author Kelly Jennings and may not reflect the opinion of any affiliates. Furthermore, all opinions are current only as of the date of the distribution to the intended recipient and are subject to change without notice. Branning Wealth Management, LLC does not have any obligation to provide revised opinions in the event of changed circumstances.
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