Abstract

http://ssrn.com/abstract=2230550
 
 

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Sensitivity of Safe Withdrawal Rates to Longevity, Market and Failure Risk Preferences with Implications for Asset Allocation


Adam Butler


BPG and Associates; affiliation not provided to SSRN

Mike Philbrick


Richardson GMP - Darwin Investment Strategies

Rodrigo Gordillo


BPG and Associates

Michael Guan


Macquarie Group – Darwin Investment Strategies

March 8, 2013


Abstract:     
Retirees face longevity risk, or the risk of living longer (or less long) than expected; market risk, or the risk of poor investment returns over the retirement horizon, and finally; failure risk, or the risk of running out of money before death. The authors examine the sensitivity of these three risks to asset allocation and Safe Withdrawal Rates, and offer a model to optimize these factors in order to minimize the three primary risks in the context of personal preferences. Finally, a forecast model is proposed to link Safe Withdrawal Rates to contemporaneous stock market valuations and interest rates, with strong statistical significance.

Number of Pages in PDF File: 21

Keywords: Retirement, Longevity, Aftcast, Safe Withdrawal Rates, SWR, Maximum Withdrawal Rates, MWR, CAPE, Aftcast, Tactical Asset Allocation, Adaptive Asset Allocation

JEL Classification: G1, D1, C5

working papers series





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Date posted: March 10, 2013  

Suggested Citation

Butler, Adam and Philbrick, Mike and Gordillo, Rodrigo and Guan, Michael, Sensitivity of Safe Withdrawal Rates to Longevity, Market and Failure Risk Preferences with Implications for Asset Allocation (March 8, 2013). Available at SSRN: http://ssrn.com/abstract=2230550 or http://dx.doi.org/10.2139/ssrn.2230550

Contact Information

Adam Butler (Contact Author)
BPG and Associates ( email )
1 Adelaide St East
Suite 2100
Toronto, Ontario M5C2V9
Canada
4165725477 (Phone)
HOME PAGE: http://www.bpgassociates.com
affiliation not provided to SSRN
Mike Philbrick
Richardson GMP - Darwin Investment Strategies ( email )
Brookfield Place
181 Bay Street, Suite 3200
M5J 2T3
Rodrigo Gordillo
BPG and Associates ( email )
1 Adelaide Street East
Suite 2100
Toronto, Ontario M5C 2V9
Canada
416-864-3597 (Phone)
HOME PAGE: http://www.gestaltu.com
Michael Guan
Macquarie Group – Darwin Investment Strategies ( email )
Brookfield Place
181 Bay Street, Suite 3200
Toronto, Ontario M5J 2T3
Canada
HOME PAGE: http://www.macquarieprivatewealth.ca/darwin
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