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ASE 12.1 Live Well, Die Broke (Inspired by a presentation given by John Charnes) client in retirement i Dr. a For investment advisors, a major
ASE 12.1 Live Well, Die Broke (Inspired by a presentation given by John Charnes) client in retirement i Dr. a For investment advisors, a major consideration in planning for client determination of a withdrawal amount that will provide the the client's re- necessary to maintain his or her desired standard of living throughout fall hele lifetime. If a client withdraws too much or if investment returns does expectations, there is a danger of either running out of funds or reducing the mon standard of living. A sustainable retirement withdrawal is the inflation-adjusted for an etary amount a client can withdraw periodically from his or her retirement funds assumed planning horizon. This amount cannot be determined with complete certainty because of the random nature ofinvestment returns. Usually, the sustainable retirement withdrawal is determined by limiting the probability of running out of funds to some specified level, such as 5% The sustainable retirement withdrawal amount is typically expressed as a percentage of the initial value of the assets in the retirement portfolio but is actually the inflation-adjusted monetary amount that the client would like each year for living expenses. Assume an investment advisor, Roy Dodson, is assisting a widowed clientin determin ing a sustainable retirement withdrawal. The client is a 59-year-old woman who tums
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