The Perfect Withdrawal Amount: A Methodology for Creating Retirement Account Distribution Strategies

Abstract

We present a new way to develop withdrawal strategies from retirement portfolios. It is derived analytically, instead of from empirical testing, and it iterates always in the same manner. It is based on a new measure we develop, the Perfect Withdrawal Amount, for which we discuss how to construct a probability distribution and how to apply it sequentially. We also derive a new measure of sequencing risk. We present new strategies built with this framework.

Keywords: Retirement, Optimal withdrawal, Safe withdrawal rate, Withdrawal rule, Sequencing risk

JEL Classification: J26, D81, D14