Does international Diversification Increase the Sustainable Withdrawal Rates from Retirement Portfolios?

Cooley, Philip L.; Hubbard, Carl M.; Walz, Daniel T.
January 2003
Journal of Financial Planning;Jan2003, Vol. 16 Issue 1, p74
Academic Journal
This article examines the effect of international equity diversification on the sustainability of a range of withdrawal rates from retirement portfolios with varying U.S. and international stock/bond asset allocations. Sustainability of a withdrawal rate is measured by portfolio success rates--that is, the percentage of 1,000 simulated portfolios of a rebalanced asset allocation that completed 15-, 20-, 25- and 30-year payout periods with positive values. The results of the simulations of fixed monthly withdrawals suggest that retirees who prefer portfolios of at least 50 percent equities benefit modestly from including EAFE stocks at 25 percent of the market value of their portfolios in spite of the inferior performance of the EAFE Index in the 1990s. It is clear from the analysis and from previous literature that international diversification has not been a panacea that can be relied on to offset U.S. bear markets. Although the return/risk impact of international stocks on U.S. portfolios has changed over the past 30 years, the research suggests that retirees with portfolios composed of 50 percent equities or greater would benefit only modestly in the long run from international diversification.


Related Articles

  • Determining Withdrawal Rates Using Historical Data. Bengen, William P. // Journal of Financial Planning;Mar2004, Vol. 17 Issue 3, p64 

    Using the concept of portfolio longevity, this article present techniques that planners can use in their practice of advising clients how much they can safely withdraw annually from retirement accounts. Following are the three largest stock-market declines since 1926 that have occurred over...

  • CalPERS Looks for Long/Short Managers. Sorondo, Marc // Investment Management Weekly;7/24/2006, Vol. 19 Issue 29, p2 

    The article reports on the request for proposal (RFP) issued by the California Public Employees' Retirement System for U.S. equity long/short managers to be part of a spring-fed pool of managers. The RFP states that the fund wants to augment its total portfolio returns by using U.S. equity...

  • LAMPERS Interviews Int'l Equity Finalists. Lewis, Jakema // Investment Management Weekly;5/21/2007, Vol. 20 Issue 20, p4 

    The article reports that the Louisiana Municipal Police Employees' Retirement System (LAMPERS) has interviewed finalists in its search for an international equity manager. The system has an asset allocation of 39 percent domestic equity, 24 percent fixed-income, 11 percent real-estate and 1...

  • Changes Ahead.  // Pensions & Investments;3/5/2012, Vol. 40 Issue 5, p40 

    The article offers news briefs from investment companies. A request for proposal (RFP) was reissued by Contributory Retirement System in Norwood, Massachusetts for an active emerging markets equity manager. Jefferson City, Missouri State Employees' Retirement System looking for an actuarial...

  • NEARING RETIREMENT. Rosato, Donna; Weisser, Cybele // Money;Aug2004, Vol. 33 Issue 8, p72 

    This article offers investment advice for Jim and Mary Ackerly. At the height of the market boom four years ago, the Ackerlys were confident that early retirement was right around the corner. Jim, now 59, had stepped down as president of an Atlanta property-management company to work fewer hours...

  • Managing a Portfolio through Transition. Benz, Christine // Morningstar Practical Finance;Jun2008, Vol. 4 Issue 6, p10 

    The article discusses the performance of the portfolio of a person named Alan. The author examines the previous portfolio of Alan, in which some of custom plans of Alan offer exposure to top-flight managers at a reasonable cost. It notes that Alan's overall asset allocation includes healthy...

  • The Dividend Builder Portfolio.  // Morningstar DividendInvestor;Jun2007, Vol. 3 Issue 5, p22 

    The article discusses the performance of the Dividend Builder Portfolio of "Morningstar DividendInvestor." The portfolio targets above-average income and high long-term income growth to generate 11%-13% total returns. The portfolio intends to achieve this through a 2%-4% current annual income...

  • True Risk. Harrison III, Walter F. // Financial Planning;Jun2003, Vol. 33 Issue 6, p125 

    Presents strategies in reducing selection risk in client portfolios. Pointers in assessing the value of a stock; Considerations in buying a stock; Questions to ask in evaluating a money manager's performance.

  • Time on your side. De Klerk, Vic // Finance Week;6/14/2004, p54 

    Provides information on the portfolio management in South Africa. Discussion on cum and ex-dividend; Information on the stock trading of Alexander Forbes; Details of investment returns.


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics