@article{Francis2002,
  title = {Withdrawal {{Rates}}, {{Buffer Portfolios}}, and {{Asset Allocation}}: {{Simulation Results}}},
  author = {{Francis E. Laatsch} and {J. Christopher Hughen}},
  year = 2002,
  journal = {The Journal of Accounting and Finance Research},
  volume = {10},
  pages = {67--75},
  abstract = {The appropriate size of the sustainable withdrawal rates from portfolios of assets intended to fund investors' retirement years has attracted the attention of  several researchers over the years (Bengen, 1994, 1996, 1997; Cooley, Hubbard, and Walz [hereafter CHW], 1998, 1999). Recently, Ogbome and Woerheide [hereafter OW] (2001) introduced the concept of a "buffer portfolio" into the study of withdrawal rates. This paper examines OW's work, but is unable to reproduce their results demonstrating superior performance when buffer portfolios are used. This paper then uses Monte Carlo simulation to generate statistically robust descriptions of the optimum asset allocation to sustain various withdrawal rates over periods of twenty, twenty-five, and thirty years. We find that for low withdrawal rates (5\% per year or less), success rates are relatively high without regard to the proportion of retirement assets invested in equities versus debt. On the other hand, for high withdrawal rates (11 \% or 12\% ), the optimum asset allocation is 100\% equity, but success rates generally fall below 50\% even at the optimum 100\% equity allocation. For withdrawal rates of 6\% and 7\%, the evidence is ambiguous. However, for withdrawal rates between 8\% and 10\% inclusive, the optimum asset allocation approaches 100\% equities and there is a high correlation between success rates and the proportion of the portfolio invested in equities. We conclude that asset allocation is unimportant at low withdrawal rates and pointless at high withdrawal rates (unless clients are willing to accept success rates below 50\%). For withdrawal rates from 8\% to 10\%, asset allocation is the crucial determinant of success and the optimum allocation is at or near to 100\% equity.}
}