Faculty Publications

Title

Weighing Sequence Of Returns Risk For Retirees

Document Type

Article

Publication Date

8-2-2016

Abstract

Taking distributions from an investment portfolio amplifies the impacts of portfolio volatility, making retirement income planning particularly tricky as distributions tend to be the primary income source for retirees. We can use Monte Carlo simulations to show the increase of money-weighted investment returns in retirement, which has important implications about the choice for a fixed portfolio return assumption that should be used when creating financial plans within a spreadsheet.