Figure 1. Portfolio Longevity |
A little bit more obscure but perhaps of more interest is the derivative of L, also lifted from the lecture notes and seen in figure 2, here presented over different w .
Figure 2. Derivative of L wrt w |
which could have also been gathered from the chart in figure 1. Figure 3 varies v the growth rate for different w where w/M > v. ...less than v tends to be a little perpetual.
Figure 3. Derivative of L wrt w for different v |
This post is not ready-set for conclusions but if I were to make conclusions they might go like this:
- Spend more = shorter lived portfolio, obviously
- Withdrawal has a non-linear impact on L with a little counter-intuition that at high w the sensitivity is lower.
- Also counter-intuitively, the impact of v (growth rate) is higher for lower withdrawal rates
- It may not be obvious but I'll say that this supports the contention I made in my 5-process series that first and second derivatives, speed and acceleration, of a process, and retirement is a process, are often of more interest than "position." They reveal aspects of the "personality" of a process that single numbers and point estimates cannot. That's one of the reasons why that ad series "what's your number" was always kind of a joke.
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