After decades of focused research, why can’t finance experts decide on a safe withdrawal rate for retirement? It is time to refocus this debate by asking a slightly different question: Is there a spending rule that retirees can use over a fixed time horizon? There is and I call it “the only spending rule you will ever need.” “The Final …
After 70 Years of Fruitful Research, Why Is There Still a Retirement Crisis?
Even in 1797, the 22-year-old author Jane Austen, patron saint of annuitants, understood why issuers of lifelong income promises might be unhappy about their side of the deal and why beneficiaries of such income guarantees are presumably happier. Austen understood time risk and longevity risk—the principal risks that individuals saving for retirement should be concerned about—better than most of today’s …
The Only Spending Rule Article You Will Ever Need
After examining an array of approaches to determining a spending rule for retirees, the authors propose the annually recalculated virtual annuity. Each year, one should spend (at most) the amount that a freshly purchased annuity—with a purchase price equal to the then-current portfolio value and priced at current interest rates and number of years of required cash flows remaining—would pay …