Strategies for mitigating the risk of outliving retirement wealth
DOI:
https://doi.org/10.61190/fsr.v22i4.4660Keywords:
Couples retirement, Social Security, Monte Carlo, Retirement risksAbstract
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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