Tuesday, October 18, 2011

October 2011 JFP: Getting on Track for a Sustainable Retirement

I've published an article, "Getting on Track for a Sustainable Retirement: A Reality Check on Savings and Work" in the current October 2011 issue of the Journal of Financial Planning. I'd like to think that with some further development, the methodology outlined in this article can provide a useful contribution to the field of retirement planning. I finished writing the article at the end of June, and I discussed it here then, but these days have been working on other issues.

CanadianInvestor, who runs a blog named How to Invest Online, has written up an excellent summary of the article.  I couldn't have said things better myself, so let me refer you to his/her (?) write-up if you are looking for a brief summary of the article, accompanied by extra interpretations with which I fully agree.

3 comments:

  1. Next step to make this even more accessible is to present it as an online calculator so that people can enter their own data to get the answer instead of using the tables. Maybe some of the answers could included an option "if you take a 5% chance of running out what will be the required savings rate?"

    PS, thanks for kind comments but the credit for the work is all yours.

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  2. Thanks for all of your helpful suggestions. For this particular one, I think this is similar to how the Trinity Study modified William Bengen's original research to look not just at the worst-case scenario from history, but also at the success or failure rates of many different withdrawal rate and asset allocation strategies. I sort of feel that this is asking for too much from the rather limited historical data.

    But to give you a general idea about the variability of the results over time, Figure 4 and Figure 5 in the paper do show these time paths for one scenario so that you can see how common or uncommon the worst case was. For that particular scenario, accepting a 5% failure rate would not really change very much.

    Thanks again.

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  3. Oh, but your idea about an online calculator is very important. I need to learn how to do that. Especially, my assumption about the constant inflation-adjusted salary is not particularly realistic.

    Thanks again.

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