Portfolio Success Rates: Where to Draw the Line

Cooley, Philip L.; Hubbard, Carl M.; Walz, Daniel T.
April 2011
Journal of Financial Planning;Apr2011, Vol. 24 Issue 4, p48
Academic Journal
� Portfolio success rate analysis provides the information needed to plan withdrawals from a retirement portfolio. Because financial markets and other matters of life change unexpectedly, those plans are likely to change. � This updated analysis reports portfolio success rates net of monthly withdrawals through a range of payout periods. The data we rely on are total returns to large-company common stocks and high-grade corporate bonds as well as Consumer Price Index values and inflation rates from January 1926 through December 2009. � We conclude that if 75 percent success is where to draw the line on portfolio success rates, a client can plan to withdraw a fixed amount of 7 percent of the initial value of portfolios composed of at least 50 percent large-company common stocks. � The sample data suggest that clients who plan to make annual inflation adjustments to withdrawals should plan lower initial withdrawal rates in the 4 percent to 5 percent range, again from portfolios of 50 percent or more large-company common stocks, in order to accommodate future increases in withdrawals. � Changes in withdrawal rates or amounts can be made in response to unexpected changes in financial market conditions using the basic tables we provide.


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