The 6% rule: Determining portfolio withdrawal rates using stochastic analysis and managed risk equities

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By Ken Mungan, Matt Kaufman | 04 September 2014
A key to creating a sustainable retirement income and overcoming the fear of running out of money in retirement is rooted in the effective management of three fundamental risks facing retirees: market risk, inflation risk, and longevity risk. Using managed risk equities to address these risks may lead to an increased portfolio withdrawal rate, while maintaining the same confidence level as the traditional approach. In this paper, we exhibit a stochastic approach to calculating a sustainable portfolio withdrawal rate and present an alternative approach to generating income and managing risk via managed risk equities.


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