Good Strategies for Wealth Distribution in Retirement

Abstract

This analysis puts forward good wealth distribution strategies for individuals and couples in retirement, considering trade-offs of wealth preservation and income security. We search among strategies that combine systematic mutual fund withdrawals with purchases of fixed payout life annuities. The search looks at a rich range of tactics including ages for annuity purchase, withdrawal rates, degrees of annuitization, and initial asset allocations. These strategies produce retirement account balances and incomes and we evaluate them using stochastic simulations of asset and annuity returns with overlays of rare financial and economic catastrophes as well as bankruptcies of insurers.