FYI: While retirement planning is often performed with Monte Carlo simulations, investors only experience a single path.
Large or prolonged drawdowns early in retirement can have a significant impact upon the probability of success.
We explore this idea by simulation returns of a 60/40 portfolio and measuring the probability of portfolio failure based upon a quantitative measure of risk called the Ulcer Index.
We find that a high Ulcer Index reading early in an investor’s retirement can dramatically increase the probability of failure as well as decrease the expected longevity of a portfolio.
Regards,
Ted
https://blog.thinknewfound.com/2019/01/drawdowns-and-portfolio-longevity/
