Sustainable Withdrawal Rates of Retirees: Is the Recent Economic Crisis a Cause for Concern?

International Journal of Economics and Finance, 3(1), 17-22

Posted: 12 Mar 2013

See all articles by Swarn Chatterjee

Swarn Chatterjee

University of Georgia

Lance Palmer

University of Georgia

Joseph W. Goetz

University of Georgia

Date Written: 2011

Abstract

A sustainable standard of living at retirement is an issue of great importance for most retirees, and is certainly a major consideration in the allocation of client portfolios for private wealth managers. This study uses historical returns and incorporates boot strapping techniques to determine the safe withdrawal rates for retiring households between 1990 and 2005. This time period is chosen because it captures the market shock at the beginning of this millennium as well as the global economic downturn of 2007-2008. The results of this study indicate that while 3% and 4% withdrawal rates are sustainable in most cases, a 5% withdrawal rate is not sustainable for recent retirees given the conventional 60/40 asset allocation strategy.

Keywords: Financial Planning, Retirement Planning, Sustainable Withdrawal Rates, Wealth Management, Asset Allocation, Portfolio Management

JEL Classification: D14, G11, G17, J14

Suggested Citation

Chatterjee, Swarn and Palmer, Lance and Goetz, Joseph W., Sustainable Withdrawal Rates of Retirees: Is the Recent Economic Crisis a Cause for Concern? (2011). International Journal of Economics and Finance, 3(1), 17-22. Available at SSRN: https://ssrn.com/abstract=2232113

Swarn Chatterjee (Contact Author)

University of Georgia ( email )

Athens, GA 30602-3622
United States

Lance Palmer

University of Georgia ( email )

United States

Joseph W. Goetz

University of Georgia ( email )

Athens, GA 30602-6254
United States

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