Market volatility poses a more substantial risk to the individual investor as they approach the last five years of their working lives, and transition through their first five years of retirement. The material risk of a poor sequence of returns during this "fragile decade" defines the decumulation period, and distinguishes it from the preceding wealth accumulation phase of an investor's life.
In this white paper, American College of Financial Services Professor Wade Pfau, PhD, examines how current market conditions—low bond yields and escalating costs in retirement—force retirees to rely more on capital gains for sustainable retirement spending. But this increases their exposure to a poor sequence of returns during the "fragile decade" which can be devastating to a retirement plan.
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Wade D. Pfau, Ph.D., CFA, RICP, is the program director of the Retirement Income Certified Professional® designation and a Professor of Retirement Income at The American College of Financial Services in King of Prussia, PA. As well, he is a Principal and Director for McLean Asset Management. He holds a doctorate in economics from Princeton University and has published more than sixty peer-reviewed research articles in a wide variety of academic and practitioner journals. He hosts the Retirement Researcher website, and is a contributor to Forbes, Advisor Perspectives, Journal of Financial Planning, and an Expert Panelist for the Wall Street Journal. Wade has authored four books, including his latest: Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success.