IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Choosing a retirement income strategy: a new evaluation framework

  • Pfau, Wade Donald

This article presents the initial stages of a new evaluation framework for choosing among retirement income strategies. The investigation includes eight retirement income strategies: constant inflation-adjusted withdrawal amounts, a constant withdrawal percentage of remaining assets, a withdrawal percentage based on remaining life expectancy, a more aggressive hybrid withdrawal percentage, inflation-adjusted and fixed single premium immediate annuities, a variable annuity with a guaranteed living withdrawal benefit rider, and a strategy which annuitizes the flooring level to meet basic needs and uses the hybrid withdrawal percentage for remaining assets. These eight strategies will be analyzed with six retirement outcome measures over a 30-year retirement period: the average amount whereby spending falls below the minimally acceptable level, the average spending amount, the remaining bequest at the end of the retirement period, the minimum spending amount for any year in the retirement period, a measure of whether spending increases or decreases over time defined as spending in the first year divided by spending in the 30th year, and the value of total spending after accounting for diminishing returns from increased spending for a client with somewhat inflexible spending needs. The model is applied to three client scenarios representing a cross-section of RIIA’s client segmentation matrix. It is built using Monte Carlo simulations which reflect current market conditions, so that systematic withdrawals and guaranteed products share compatible underlying assumptions.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/39169/1/MPRA_paper_39169.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39169.

as
in new window

Length:
Date of creation: 01 Jun 2012
Date of revision:
Handle: RePEc:pra:mprapa:39169
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39169. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.