Refining the Failure Rate
Posted: 21 May 2019
Date Written: October 13, 2016
The relevance of determining how often a retirement strategy failed in the past, and how likely it is to fail in the future, can hardly be overstated. For this reason, the failure rate has become an essential tool when evaluating these strategies. However, this variable is silent about how long into the retirement period a strategy failed; two strategies that sustained withdrawals for 10 and 25 years of a 30-year retirement period have both failed, but a retiree would be far from indifferent between them. The two variables proposed here, which seek to refine and complement, not to replace, the failure rate aim to correct this shortcoming.
Keywords: failure rate, retirement strategies
JEL Classification: G11
Suggested Citation: Suggested Citation