Withdrawal Rate Strategies for Retirement Portfolios: Preventive Reductions and Risk Management

20 Pages Posted: 16 Oct 2009

See all articles by John B. Mitchell

John B. Mitchell

Central Michigan University - Department of Finance and Law

Date Written: October 15, 2009

Abstract

This paper builds on the work of Stout and Mitchell (2006), Stout (2008), and Blanchett and Frank (2009) by creating a preventive approach to withdrawal management. Proactive strategies, which reduce the withdrawal rate before there are insufficient funds, are shown to significantly reduce the probability of ruin (shortfall) while maintaining the average withdrawal rate. The paper also explores the micro effects of strategy changes by dividing the simulation iterations into groups which have been positively or negatively affected by any particular change, and demonstrates that conventional reporting of the effectiveness of withdrawal rate management techniques can be improved by examining additional moments of the distribution. Data covers 1926-2008 and the mortality table is extended to 108 years.

Keywords: withdrawal rate, retirement, risk management

JEL Classification: G11, C15, I12, J26

Suggested Citation

Mitchell, John B., Withdrawal Rate Strategies for Retirement Portfolios: Preventive Reductions and Risk Management (October 15, 2009). Available at SSRN: https://ssrn.com/abstract=1489657 or http://dx.doi.org/10.2139/ssrn.1489657

John B. Mitchell (Contact Author)

Central Michigan University - Department of Finance and Law ( email )

328 Sloan Hall
Mount Pleasant, MI 48859
989-774-3651 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
291
Abstract Views
1,414
rank
106,154
PlumX Metrics