West Loop Financial LLCAn Analytical Evaluation of Rising Glidepath Claims – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 An Analytical Evaluation of Rising Glidepath Claims https://www.westloopfinancial.com/2014/09/29/an-analytical-evaluation-of-rising-glidepath-claims/ https://www.westloopfinancial.com/2014/09/29/an-analytical-evaluation-of-rising-glidepath-claims/#respond Mon, 29 Sep 2014 09:00:53 +0000 http://evolvemypractice.com/?p=1346 Last year, a piece by Michael Kitces and Wade Pfau made the claim that mechanically increasing the equity allocation during retirement — which they term a “rising glidepath” — could reduce the likelihood that a retiree outlives his or her assets and could decrease the magnitude of shortfall when capital market returns disappoint. Specifically, the...

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]]> Last year, a piece by Michael Kitces and Wade Pfau made the claim that mechanically increasing the equity allocation during retirement — which they term a “rising glidepath” — could reduce the likelihood that a retiree outlives his or her assets and could decrease the magnitude of shortfall when capital market returns disappoint. Specifically, the paper stated:

“We find, surprisingly, that rising equity glidepaths in retirement … have the potential to actually reduce both the probability of failure and the magnitude of failure for client portfolios.”

I initially suspected the basic claims might not hold up under analytic scrutiny and recently got the chance to dig into their data tables to find out. In my analysis, I focus on the success rates and 5th percentile shortfall results they report in Tables 2, 4 and 6 in their paper. These three tables contain results for 4 percent withdrawal rates under three different sets of capital market assumptions.

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