Faculty Publications

Title

Depleting assets may be a good strategy

Document Type

Article

Publication Date

12-6-2012

Abstract

The classic rule-of-thumb about retirement income is that you can withdraw 4% of your retirement date assets, adjust that amount for subsequent inflation, and expect your wealth to last for at least 30 years. Upon quick inspection, it seems that economists might like this concept, since it supports the idea of consumption smoothing. All things being the same, people tend to get the most lifetime satisfaction by spending a constant amount from year to year, rather than dealing with fluctuating spending over time.