• Delaying Social Security Payments: A Bootstrap

      Spitzer, John J.; The College at Brockport (2006-10-01)
      This paper reconciles previous research outcomes and explains why prior studies offer conflicting recommendations regarding the decision to delay Social Security payments. Using a bootstrap, this paper determines the age at which a retiree is better off deferring Social Security payments when rates of return are not constant. The expected rate of return affects the breakeven age and the rate of return is a function of asset allocation. When life expectancy and realistic investment returns are incorporated into the analysis, there are few circumstances that warrant postponing Social Security payments for early retirees.
    • Delaying Social Security Payments: A Bootstrap

      Spitzer, John J.; The College at Brockport (2006-10-01)
      This paper reconciles previous research outcomes and explains why prior studies offer conflicting recommendations regarding the decision to delay Social Security payments. Using a bootstrap, this paper determines the age at which a retiree is better off deferring Social Security payments when rates of return are not constant. The expected rate of return affects the breakeven age and the rate of return is a function of asset allocation. When life expectancy and realistic investment returns are incorporated into the analysis, there are few circumstances that warrant postponing Social Security payments for early retirees.
    • Managing a Retirement Portfolio: Do Annuities Provide More Safety?

      Spitzer, John J.; The College at Brockport (2009-07-01)
      Even with the generally recognized “safe” withdrawal amount of 4% of the retirement portfolio starting balance, more than 5% of retirement portfolios will run out of money over a 30-year period. Bootstrap simulations were used to estimate the probability of outliving a retirement portfolio as increasing proportions of a tax-deferred account are annuitized. The impacts of Required Minimum Distributions and taxable Social Security income were incorporated into the analysis. Results indicate that annuities significantly extend the length of time the portfolio lasts, but the expected balance remaining (estate size) will decrease substantially, a trade-off of security versus a legacy. Advisors and planners may find the graphical exposition helpful when showing clients different tradeoff options.
    • Managing a Retirement Portfolio: Do Annuities Provide More Safety?

      Spitzer, John J.; The College at Brockport (2009-07-01)
      Even with the generally recognized “safe” withdrawal amount of 4% of the retirement portfolio starting balance, more than 5% of retirement portfolios will run out of money over a 30-year period. Bootstrap simulations were used to estimate the probability of outliving a retirement portfolio as increasing proportions of a tax-deferred account are annuitized. The impacts of Required Minimum Distributions and taxable Social Security income were incorporated into the analysis. Results indicate that annuities significantly extend the length of time the portfolio lasts, but the expected balance remaining (estate size) will decrease substantially, a trade-off of security versus a legacy. Advisors and planners may find the graphical exposition helpful when showing clients different tradeoff options.
    • Retirement Withdrawals: an Analysis of the Benefits of Periodic “Midcourse” Adjustments

      Spitzer, John J.; The College at Brockport (2008-04-01)
      Much research has addressed the question of how much money can safely be withdrawn from a retirement portfolio without prematurely running out of money (shortfall risk). Instead of constant (inflation adjusted) annual withdrawals, this study uses withdrawal amounts (and optionally, asset allocations) that are modified every five years over a 30-year withdrawal horizon. A bootstrap is used initially to obtain the conditional probability rules. Further simulations demonstrate that periodic (every five years) adjustments can decrease the risk of running out of money as well as increase the amount withdrawn, as compared to a “constant withdrawal amount” strategy
    • Retirement Withdrawals: an Analysis of the Benefits of Periodic “Midcourse” Adjustments

      Spitzer, John J.; The College at Brockport (2008-04-01)
      Much research has addressed the question of how much money can safely be withdrawn from a retirement portfolio without prematurely running out of money (shortfall risk). Instead of constant (inflation adjusted) annual withdrawals, this study uses withdrawal amounts (and optionally, asset allocations) that are modified every five years over a 30-year withdrawal horizon. A bootstrap is used initially to obtain the conditional probability rules. Further simulations demonstrate that periodic (every five years) adjustments can decrease the risk of running out of money as well as increase the amount withdrawn, as compared to a “constant withdrawal amount” strategy
    • Shortfall Risk of Target-date Funds During Retirement

      Spitzer, John J.; Singh, Sandeep; The College at Brockport (2008-06-01)
      Target-date mutual funds are likely to increase in popularity because they are now one of the three approved default options for many retirement plans. In the retirement years, target-date funds become increasingly conservative with higher bond concentrations. Using a bootstrap simulation and rolling period analysis, three target-date fund classifications are shown to have higher probabilities of running out of money and lower balance remaining when compared to fixed allocation portfolios. A fixed 50/50 stock/bond portfolio unambiguously out-performs the target-date funds, regardless of methodology employed. In light of this evidence, these funds should revisit their asset allocation strategy.
    • Shortfall Risk of Target-date Funds During Retirement

      Spitzer, John J.; Singh, Sandeep; The College at Brockport (2008-06-01)
      Target-date mutual funds are likely to increase in popularity because they are now one of the three approved default options for many retirement plans. In the retirement years, target-date funds become increasingly conservative with higher bond concentrations. Using a bootstrap simulation and rolling period analysis, three target-date fund classifications are shown to have higher probabilities of running out of money and lower balance remaining when compared to fixed allocation portfolios. A fixed 50/50 stock/bond portfolio unambiguously out-performs the target-date funds, regardless of methodology employed. In light of this evidence, these funds should revisit their asset allocation strategy.