The impact of asset allocation, savings, and retirement horizons, savings rates, and social security income in retirement planning
A Monte Carlo analysis
DOI:
https://doi.org/10.61190/fsr.v18i4.4954Keywords:
Portfolio choice, Retirement planningAbstract
This study uses Monte Carlo simulation to evaluate the ability of various deposit percentages and asset allocation weights to support withdrawals in retirement that permit smoothed income over the life of an individual. The results indicate that, in general, individuals need to deposit at least 15% of pre-retirement salary for 30 or more years in a portfolio consisting of at least 50% equity to achieve a high success rate for portfolio withdrawals. When Social Security payments are excluded from the retirement income, the success rate is greatly impacted by the savings rate, the savings period, and the amount of equity investment in the portfolio.
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