How does the distribution period change each year as a retiree ages? Does this change the retirement income based on age?
This research paper incorporates both probability of the portfolio (market risk) and probability of the person (longevity risk) for retirement de-cumulation (i.e., income). A method is shown to evaluate either a "consumption-oriented" retiree, or an "inheritance/bequest-oriented" retiree.
Note: The 3D nature of retirement income withdrawals from portfolios over time and allocation was duplicated through a different methodology in:
Suarez, E. Dante. 2020. "The Perfect Withdrawal Amount Over the Historical Record." Financial Services Review, The Journal of Individual Financial Management. Volume 28, No.2: 96-132, Figure 26.
An Age-Based, Three-Dimensional Distribution Model Incorporating Sequence And Longevity Risks
Paper and cover photo, posted with permission from the Financial Planning Association, Journal of Financial Planning, March 2012, by Larry R Frank Sr, John B Mitchell, and David M. Blanchett.
The Journal of Financial Planning is published by the Financial Planning Association® (FPA®) and all information published within is the sole property of FPA.
This paper was presented at the Academy of Financial Services in Las Vegas NV, October 23-24, 2011 (see Proceedings for other papers presented), and the working paper with data is available at Social Sciences Research Network.
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