The Case for Flexible Retirement Planning

The Journal of Personal Finance, 2009 8:63-78.

16 Pages Posted: 19 Oct 2015

See all articles by R Gene Stout

R Gene Stout

Central Michigan University - Department of Finance and Law

John B. Mitchell

Central Michigan University - Department of Finance and Law

Date Written: 2009

Abstract

This paper examines the importance of the volatility of investment returns and the uncertainty of remaining lifespan in retirement planning. These factors cause the unnecessary sacrifice of higher withdrawals to reduce the probability of exhausting the retirement portfolio before death (portfolio ruin) if withdrawal rates are constant. Flexible retirement planning, characterized by withdrawal rate adjustments in response to unexpected portfolio performance or changes in expected remaining life, reduces the withdrawal rate sacrifice of probability-of-ruin protection. As Baby Boomers recognize the “preparation gap” consequence from low saving rates and longer expected life spans, flexible retirement planning will prove productive in improving the retirement lifestyle without unduly increasing the probability of ruin.

Keywords: Flexible retirement planning, withdrawal rates

JEL Classification: D9, J26

Suggested Citation

Stout, R Gene and Mitchell, John B., The Case for Flexible Retirement Planning (2009). The Journal of Personal Finance, 2009 8:63-78.. Available at SSRN: https://ssrn.com/abstract=2675878

R Gene Stout

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

Mount Pleasant, MI 48859
United States

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)

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