How Withdrawal Sequence Affects the Longevity and Risk of Retirees Portfolios: Additional Evidence
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Authors
Weigand, Robert A.
Irons, Robert
Issue Date
2007-08-1
Type
Working paper
Language
en_US
Keywords
Portfolio longevity , Portfolio management , Retirement planning , Withdrawal sequencing
Alternative Title
Abstract
We examine the effect of the withdrawal sequencing decision on the longevity of retirees' portfolios by comparing the strategy of consuming bond assets first with maintaining a 50/50 stock/bond portfolio and consuming stock assets first. Using a long time series of data, we find that consuming bonds first consistently extends investor portfolios, although in about ten percent of the cases the strategy does not outperform the other methods. We also identify a market signal that effectively predicts when a bonds-first strategy will produce the largest gains. Based on current values of the signal, it appears that retirees in 2007 should be cautious about consuming bond assets first, as the strategy is currently unlikely to result in the same extension of portfolio longevity as it has historically.
Description
Citation
Publisher
Washburn University. School of Business