From Failure to Success: Replacing the Failure Rate

15 Pages Posted: 19 Apr 2017

Date Written: April 18, 2017


The failure rate is arguably the variable most widely used in the evaluation of retirement strategies. Its main shortcoming, evaluating how often a strategy fails but not by how much it does, is overcome by shortfall years, which considers precisely this information. The joint use of the failure rate and shortfall years is an improvement over using just the failure rate but implies the use of two variables, rather than just one, which do not always point in the same direction. This article introduces a new variable, years sustained, that focuses on success rather than on failure. The ratio between its mean and standard deviation, risk-adjusted success, is the single variable proposed here for a comprehensive evaluation of retirement strategies.

Keywords: Failure rate; retirement planning; shortfall years; risk-adjusted success

JEL Classification: G11

Suggested Citation

Estrada, Javier, From Failure to Success: Replacing the Failure Rate (April 18, 2017). Available at SSRN: or

Javier Estrada (Contact Author)

IESE Business School ( email )

IESE Business School
Av. Pearson 21
Barcelona, 08034
+34 93 253 4200 (Phone)
+34 93 253 4343 (Fax)

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