Retirment Account Withdrawal Rates and Market Valuation Levels
Open Access
Author:
Heaphy, Joseph J
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
James Alan Miles, Thesis Supervisor James Alan Miles, Thesis Honors Advisor William Kracaw, Faculty Reader
Keywords:
Withdrawal Rate Asset Allocation Price to Earnings Ratio Dividend Yield
Abstract:
Since their introduction, contributions to 401(k) plans have become the most important and fastest growing form of retirement savings. Along with tax advantages, the rise of personal retirement accounts has brought about more complexity for retirees. The modern dilemma that arises for retirees with personal retirement accounts is if they withdraw too much from their savings they will run out of money before death but if they withdraw too little from their savings they will unnecessarily lower their standard of living. The inherent question that arose from this dilemma by individuals entering retirement was: what is the best retirement asset allocation and withdrawal rate? This study uses historical stock market returns, price to earnings ratios, and dividend yields from 1971 to 2010 to explore and provide a possible answer to this question. The results of this study indicate that individuals planning for retirement should consider price to earnings ratios and dividend yields when making retirement decisions.
