Objective research to aid investing decisions

Value Investing Strategy (Strategy Overview)

Allocations for October 2020 (Final)
Cash TLT LQD SPY

Momentum Investing Strategy (Strategy Overview)

Allocations for October 2020 (Final)
1st ETF 2nd ETF 3rd ETF

Ending with the Beginning in Mind

| | Posted in: Bonds, Equity Premium, Strategic Allocation

How should investors think about the interactions between working years (retirement account contributions) and retirement years (retirement account withdrawals)? In his June 2020 paper entitled "Retirement Planning: From Z to A", Javier Estrada integrates working and retirement periods to estimate how much an individual should save and how they should invest to achieve a desired retirement income and ultimate bequest to heirs. He illustrates his analytical solution empirically for U.S. stocks and bonds, first using a base case plus sensitivity analysis and then using Monte Carlo simulations. His base case assumes:

  • Work will last 40 years with a 60%/40% stocks/bonds retirement portfolio.
  • Retirement will last 30 years with beginning-of-year real (inflation-adjusted) withdrawals of $60,000 from a 40%/60% stocks/bonds retirement portfolio and ultimate bequest $300,000.

Using annual data for U.S. stocks (the S&P 500 Index total return), bonds (10-year U.S. Treasury notes) and U.S. inflation during 1928 through 2019, he finds that:

Please or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more!  Learn more

Login
Daily Email Updates
Filter Research
  • Research Categories (select one or more)