neil hartner

Asset Allocation: Finding Your Risk Level

Geoff, thanks for the detailed analysis. It seems to me John can eliminate the possibility of going broke by reducing the amount he withdraws if/when his portfolio's value falls below the expected value. A simple strategy would be to reduce withdrawals by 1% for every 2% the portfolio falls under par. For example, if your QPP tool predicts that at age 70, John's portfolio should be worth 5 million, but when he turns 70 it is actually worth 4 million, then John would only withdraw 90K. As his portfolio recovers, he can resume taking out more and more, up to 100K.

Hypothetically, this strategy would guarantee he would never go broke, so the risk calculation would then be this: what are the chances he will ever have to lower his withdrawals to 90K, 80K, 70K, etc? Maybe this is impossible to calculate, but if not, I'd be curious to know the results.