Abstract
Retirees face longevity risk, or the risk of living longer (or less long) than expected; market risk, or the risk of poor investment returns over the retirement horizon, and finally; failure risk, or the risk of running out of money before death. The authors examine the sensitivity of these three risks to asset allocation and Safe Withdrawal Rates, and offer a model to optimize these factors in order to minimize the three primary risks in the context of personal preferences. Finally, a forecast model is proposed to link Safe Withdrawal Rates to contemporaneous stock market valuations and interest rates, with strong statistical significance.
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