Reality check

The implications of applying sustainable withdrawal rate analysis to real world portfolios

Authors

  • Qianqiu Liu Shidler College of Business, University of Hawaii at Manoa
  • Rosita P. Chang Shidler College of Business, University of Hawaii at Manoa
  • Jack C. De Jong Wayne Huizenga School of Business and Entrepreneurship, Nova Southeastern University
  • John H. Robinson Hawaii Wealth Management, Honolulu, HI

DOI:

https://doi.org/10.61190/fsr.v18i2.4940

Keywords:

Bootstrapping, Sustainable withdraw rate, Retirement portfolio, Asset allocation

Abstract

This paper brings portfolio sustainability research closer to practical application by examining how common practitioner investment and withdrawal strategies impact sustainability. The results suggest that the application of a multiasset portfolio model may improve sustainability success rates relative to simple two-asset models illustrated in previous research, and the advantage becomes more pronounced with higher withdrawal rates and longer time horizons. We also find that a "bonds first" withdrawal strategy appears to be superior to a constant allocation strategy as both time horizon and withdrawal rate rise. Most notably, the results of our analysis suggest that there is no single optimal retirement asset allocation, but rather a continuum of ideal allocations that become increasingly equity-weighted as the investor's required withdrawal rate and/or expected time horizon increase.

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Published

2009-06-30

Issue

Vol. 18 No. 2 (2009): FSR Summer 2009

Section

New Original Submission

License

Copyright (c) 2009 Academy of Financial Services

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How to Cite

Reality check: The implications of applying sustainable withdrawal rate analysis to real world portfolios. (2009). Financial Services Review, 18(2), 123-139. https://doi.org/10.61190/fsr.v18i2.4940