Part 5 - Asset Allocation and Portfolio Longevity with (Lower) Spend Rates

 This post is part 5 of a series on Portfolio Longevity, a series made up of these links:

• Asset Allocation and Portfolio Longevity with High Spend Rates
• Part 2 - Asset Allocation and Portfolio Longevity with High Spend Rates
• Part 3 - Asset Allocation and Portfolio Longevity with High Spend Rates
• Part 4 - Asset Allocation and Portfolio Longevity with (Moderate) Spend Rates

The point of this post is to 

- 1) drop the spending from 4% to 3% (i.e., lower spending). and 

- 2) look at the impact of "asset allocation choice" on portfolio longevity, using the same set-up we started with in the first link but with the following provisos for what I have changed since then. Here is what is different now:

Part 4 - Asset Allocation and Portfolio Longevity with (Moderate) Spend Rates

Warning: this is unfinished so TBD...

 This post is an extension of the previous three posts:

• Asset Allocation and Portfolio Longevity with High Spend Rates
• Part 2 - Asset Allocation and Portfolio Longevity with High Spend Rates
• Part 3 - Asset Allocation and Portfolio Longevity with High Spend Rates

where the main explanation of the set-up is in the first link and a revision to some key parameters in the third link. The quick explanation for this post is that I am trying to look at the interaction between: a) an oversimplified and reductive and not all that realistic set of portfolio choices and b) portfolio longevity in years. And I want to take that look without dwelling on planning horizons or human mortality (might here though). 

Part 3 - Asset Allocation and Portfolio Longevity with High Spend Rates

 This is an addendum to the last post

• Part 2 - Asset Allocation and Portfolio Longevity with High Spend Rates

It is also going to be a chart-crime so get out the yellow tape. 

Part 2 - Asset Allocation and Portfolio Longevity with High Spend Rates

The point of this post is to use one alternative way to visualize the interior of the distributions in Figure 2 of the last post

• Asset Allocation and Portfolio Longevity with High Spend Rates

All of the assumptions are the same as in the link. After a reader question: the returns and spend are real but clearly not realistic. I haven't thought about that realism much yet. The reader pointed out the low risk option in real life would be less likely a 0 allocation to the HR strawman and more likely a TIPS ladder or an annuity or something. 

Asset Allocation and Portfolio Longevity with High Spend Rates

The point of this post is: 

Let's look at the response of a particular metric "portfolio longevity in years" (unbounded by human life scales, btw) to asset allocation along an arbitrary but not totally unrealistic efficient frontier...but: in the presence of high spend rates. 

High spend rates here could be interpreted as either: 1) a literal high spend, or 2) as an underfunded retirement. Same thing. There are probably some pension finance corollaries here too while we are at it.  I don't remember but I might have done this before here or I might have at least done some pieces of this before but whatever, let's dive in yet again to see how it looks. That (how things look) is my perennial question that got me from 2012 to 2022 on this blog and its precursors.