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Investing Research Articles

84 Research Articles

Safe Retirement Withdrawal Rate?

In the current environment of low bond yields, what is a safe investment withdrawal rate during retirement? In their January 2013 paper entitled “The 4% Rule is Not Safe in a Low-Yield World”, Michael Finke, Wade Pfau and David Blanchett model the risk of exhausting wealth for different retirement durations, withdrawal rates, stocks-bonds portfolio mixes… Keep Reading

Are Target Retirement Date Funds Attractive?

Do target retirement date funds, offering glidepaths that shift asset allocations away from equities and toward bonds as target dates approach, safely generate attractive returns? To investigate, we consider seven such mutual funds offered by Vanguard, as follows: Vanguard Target Retirement 2020 Fund (VTWNX) Vanguard Target Retirement 2025 Fund (VTTVX) Vanguard Target Retirement 2030 Fund… Keep Reading

Retirement Withdrawal Modeling with Actuarial Longevity and Stock Market Mean Reversion

How does use of actuarial estimates of retiree longevity and empirical mean reversion of stock market returns affect estimated retirement portfolio success rates? In the October 2018 revision of his paper entitled “Joint Effect of Random Years of Longevity and Mean Reversion in Equity Returns on the Safe Withdrawal Rate in Retirement”, Donald Rosenthal presents a… Keep Reading

Retirement Allocation Strategy Informed by P/E10

Does adjusting an asset allocation retirement glidepath according to a stock market valuation metric such as Shiller’s cyclically adjusted price-earnings ratio (CAPE ratio or P/E10) improve the outcome? In their September 2014 paper entitled “Retirement Risk, Rising Equity Glidepaths, and Valuation-Based Asset Allocation”, Michael Kitces and Wade Pfau investigate the interaction of pre-determined allocation glidepaths and P/E10 valuation… Keep Reading

Retirement Income Planning Model

How should financial advisers and investors approach retirement income planning? In their January 2021 paper entitled “A Model Approach to Selecting a Personalized Retirement Income Strategy”, Alejandro Murguia and Wade Pfau design and validate a questionnaire designed to quantify retirement income styles based on six preference scales: Probability-based vs. Safety First (main) – depending on… Keep Reading

Benefit of Tax-deferred Retirement Savings?

How effective are tax-deferred savings in avoiding federal income taxes over a lifetime? In their May 2011 paper entitled “The Tax Benefit of Income Smoothing”, Kristian Rydqvist, Steven Schwartz and Joshua Spizman estimate the lifetime benefit of postponing federal income tax liability until retirement by contributing pre-tax dollars to individual or employer-sponsored retirement savings while… Keep Reading

Adequacy of Publicly Available Retirement Planning Tools

Should investors trust retirement planning tools that are publicly available on financial websites? In their February 2016 paper entitled “The Efficacy of Publicly-Available Retirement Planning Tools”, Taft Dorman, Barry Mulholland, Qianwen Bi and Harold Evensky: Identify via theoretical analysis and a survey of financial professionals the demographic, financial and economic variables important as inputs to retirement planning. Assess… Keep Reading

A Few Notes on Your Complete Guide to a Successful and Secure Retirement

Larry Swedroe and Kevin Grogan introduce their 2019 book, Your Complete Guide to a Successful and Secure Retirement, as follows: “…failure to plan is to plan to fail. While so many of us have carefully planned our education, career choices, and family responsibilities, we tend to fail to prepare a written retirement life plan that considers, among other things, our… Keep Reading

Early Retirement Safe Withdrawal Rate

What is a safe portfolio withdrawal rate for early retirees who expect more than 30 years of retirement? In their February 2017 paper entitled “Safe Withdrawal Rates: A Guide for Early Retirees”, ERN tests effects of several variables on retirement portfolio success: Retirement horizons of 30, 40, 50 and 60 years. Annual inflation-adjusted withdrawal rates of 3%… Keep Reading

Retirement Income Modeling Risks

How much can the (in)accuracy of retirement portfolio modeling assumptions affect conclusions about the safety of retirement income? In their December 2014 paper entitled “How Risky is Your Retirement Income Risk Model?”, Patrick Collins, Huy Lam and Josh Stampfli examine potential weaknesses in the following retirement income modeling approaches: Theoretically grounded formulas – often complex with rigid assumptions. Historical backtesting – the… Keep Reading