The Hidden Peril In Sequence Of Returns Risk
Should retirees place greater faith in stocks’ ability to outperform bonds over reasonable holding periods or in insurance companies and bond issuers’ ability to meet their contractual guarantees? Your position on this fundamental question will determine how you choose to build retirement income strategies for your clients. Instead of taking a side in this debate, I will illustrate how sequence of returns risk can derail a cohort of retirees. Indeed, that can happen without an economic catastrophe wiping out large financial institutions.
Pfau, Wade, "The Hidden Peril In Sequence Of Returns Risk" (2015). Faculty Publications. 38.