Abstract
We examine the sustainability of wealth and associated risks faced by a retiree in the drawdown phase of retirement. Risks are assessed using a range of commonly recommended withdrawal rates, and applied to common investment strategies in the UK markets. We consider the issue of time diversification of risk, in the context of expected retirement horizons. Our results demonstrate that after allowing for compounding effects and for regular investment withdrawals, the risk of financial ruin increases with the length of the retirement horizon, contrary to the premise of time diversification of risk.
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