Strategies for mitigating the risk of outliving retirement wealth

Authors

  • Vickie Bajtelsmit Department of Finance and Real Estate, Colorado State University
  • LeAndra Ottem Foster Della Parola Capital Management, Fort Collins, CO
  • Anna Rappaport Rappaport Consulting, Chicago

DOI:

https://doi.org/10.61190/fsr.v22i4.4660

Keywords:

Couples retirement, Social Security, Monte Carlo, Retirement risks

Abstract

Whether retirement wealth will last a lifetime depends on many factors, including spending and saving decisions, investment performance, qualification for defined benefit or other annuity income streams, health care costs, long-term care (LTC) risk, and longevity. Individuals may be able to improve retirement outcomes by making better-informed choices both before and during retirement. This article uses Monte Carlo simulation to simultaneously model stochastic financial, health, long term care, and life risks and evaluates which financial strategies best mitigate the risk of outliving retirement wealth. A combined strategy of delayed retirement and Social Security claiming, reduced discretionary spending, and LTC insurance is found to greatly improve retirement outcomes for typical retiree households.

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Published

2013-12-31

How to Cite

Bajtelsmit, V., Foster, L. O., & Rappaport, A. (2013). Strategies for mitigating the risk of outliving retirement wealth. Financial Services Review, 22(4), 311–329. https://doi.org/10.61190/fsr.v22i4.4660

Issue

Vol. 22 No. 4 (2013): FSR Winter 2013

Section

New Original Submission

License

Copyright (c) 2013 Academy of Financial Services

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