The perfect withdrawal amount over the historical record

Authors

  • E. Dante Suarez Department of Finance and Decision Sciences, Trinity University School of Business

DOI:

https://doi.org/10.61190/fsr.v28i2.3420

Keywords:

Distribution strategies, Sustainable withdrawal rate, Sequencing risk, Perfect withdrawal amount, Retirement income

Abstract

What has been the perfect withdrawal amount (PWA) from retirement savings accounts in long- term historical data? The PWA is that which, if taken out in the first year of retirement and used again every year adjusted by inflation, leaves exactly the desired final balance on the account. We present the formula for obtaining this measure and evaluate the values it has taken in the past under varying combi- nations of the relevant parameters. We find that safety-minded investors should enter retirement with a higher stock allocation than what is currently used in most investment funds designed to provide income during retirement.

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Published

2020-06-30

How to Cite

Suarez, E. D. (2020). The perfect withdrawal amount over the historical record. Financial Services Review: The Journal of Individual Financial Management, 28(2), 96–132. https://doi.org/10.61190/fsr.v28i2.3420

Issue

Vol. 28 No. 2 (2020): Summer 2020

Section

New Original Submission

License

Copyright (c) 2020 Academy of Financial Services

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