With a massive chunk of the 77 million baby boom generation reaching age 65 this year, much of the financial planning industry's energy and focus has shifted from the best ways to accrue assets, to discovering how best to convert a lifetime of accumulated savings into a lifelong retirement income stream. And while the market volatility of the past decade has been painful, it has also provided an excellent opportunity to test some of the more established income distribution methods and develop new solutions for the next generation of retirees. So what are the factors to consider in constructing a retirement portfolio and what are the standard methods of doing so?

"One of the things we need to watch out for is what behavioral economists call 'recency bias'," says Jonathan Guyton, a retirement planning expert and principal of Cornerstone Wealth Advisors in Minneapolis. "Recency bias occurs when considering the worst-case scenario, you become more concerned about the bad things that happened most recently." For investors and advisors who have just survived the Great Recession, that most recent threat is short-term volatility.

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