The Impact of the 2008 Financial Crisis on Withdrawals of Retirement Wealth

During the financial crisis of 2007-2009, the market value of retirement assets held in stock fell by 32%. The objective of this study is to show how a severe financial crisis affects the withdrawal patterns of retirees. Specifically, the authors examine how withdrawal patterns change when an unexpe...

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Bibliographic Details
Published in:The journal of wealth management 2015-04, Vol.17 (4), p.57-66
Main Authors: Arshanapalli, Bala, Nelson, William, Pollak, Micah
Format: Article
Language:English
Subjects:
Bond portfolios
Economic crisis
Impact analysis
Investments
Market value
Monte Carlo simulation
Retirees
Retirement planning
Revisions
Stock
Stocks
Studies
Wealth
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Summary:During the financial crisis of 2007-2009, the market value of retirement assets held in stock fell by 32%. The objective of this study is to show how a severe financial crisis affects the withdrawal patterns of retirees. Specifically, the authors examine how withdrawal patterns change when an unexpected major investment shock at various years into retirement is induced artificially. The results show that an equally weighted portfolio of stocks and bonds performs better than a portfolio of 100%) stock, or a portfolio of 100% bonds, by providing a more stable withdrawal pattern.
ISSN:1534-7524
2374-1368
DOI:10.3905/jwm.2015.17.4.057