Faculty Publications

Title

Will 2000-Era Retirees Experience the Worst Retirement Outcomes in U.S. History? A Progress Report after 10 Years

Document Type

Article

Publication Date

Winter 2011

DOI

10.3905/joi.2011.20.4.117

Abstract

We find evidence that retirees in 2000, in particular, are on course to potentially experience the worst retirement outcomes of any retiree since 1926. This holds for a wide variety of asset allocations and withdrawal rate strategies. Nominal wealth depletion is taking place more rapidly for 2000-era retirees than for retirees who even endured the Great Depression or the stagflation of the 1970s. Though moderate inflation during the past decade has resulted in a better situation for current withdrawal rates and real wealth for the 2000 retiree compared to some past retirees, this is hardly reassuring with further analysis based on the required future asset returns needed for sustainability and the market conditions facing retirees 10 years later. Our findings cast doubt as to whether the 4% withdrawal rate rule will be sustainable for turn-of-the-century retirees.