What Type Of Retirement Spender Will You Be?
In August 2015, J.P. Morgan Asset Management released a study about retirement spending by Katherine Roy and Sharon Carson. In analyzing the expenditures for their diverse consumer base, they identified four retirement spending profiles and an additional category of miscellaneous individuals.
What Is Age Banding And What Does It Mean For Retirees?
Another important contribution in the area of retirement spending patterns is Somnath Basu’s 2005 article “Age Banding: A Model for Planning Retirement Needs.” Though it provided a comprehensive retirement planning framework, I want to focus specifically on the findings that covered post-retirement spending patterns.
Retirement Spending Increases And Decreases Over Time
An important simplifying assumption in William Bengen’s research is that retirees spend constant inflation-adjusted amounts throughout retirement. This may be at odds with the spending patterns of many retirees.
Should You Lower Your Distributions If Your Portfolio Underperforms The Stock Market?
Another optimistic assumption of classic safe withdrawal rate studies is that retirees are able to earn precisely the underlying index returns net of the risks. But three truths dispute that idea.
Does The 4% Rule Work Around The World?
From a global perspective, asset returns enjoyed a particularly favorable climate in the twentieth-century United States, and to the extent that the U.S. may experience reversion in the twenty-first century, present conceptions of safe withdrawal rates may be unsafe.
What Do Market Expectations Have To Do With Safe Withdrawal Rates?
Rather than asking for the probability of success associated with a particular withdrawal rate, we could calculate the highest sustainable withdrawal rate linked to a particular probability of success.
The Advantages Of Monte Carlo Simulations In Retirement Income Planning
One of the classic approaches to studying retirement withdrawal rates is to use Monte Carlo simulations that are parameterized to the same historical data as used in historical simulations.
Does Asset Allocation Affect Withdrawal Rates?
One other important factor from William Bengen’s original study is asset allocation. In particular, he recommended that retirees maintain a stock allocation of 50-75%, writing, “I think it is appropriate to advise the client to accept a stock allocation as close to 75 percent as possible, and in no cases less than 50 percent.”
What Can We Learn from the Market Disasters of the 1970s?
Throughout history, when bad news and events touched the daily lives of investors and caused nest eggs to shrink, it’s been natural to ask, “Is this the end of investing as we know it? Have new developments changed things so much that the old patterns no longer apply?” These four stories should help illustrate an […]
Sustainable Retirement Spending and Market Returns
What happens to sustainable spending rates as the planning horizon extends, or
if we build in a constraint to preserve wealth and avoid portfolio depletion?
