Sequence Risk

Objective:

• Provide probability analysis on the likelihood a retirees money will last their life expectancy. 

Suitable for:

• Post-retirees looking to gain insight into their potential spending capacity in retirement. 

Key features:

• Simulation analysis is performed to model the uncertainty of investment returns. Expected return, standard deviation, correlation between assets classes can be set by the user. 

• Analysis is provided on up to 5 portfolios plus a specific asset allocation nominated by the adviser.

• Model is able to provide a recommended drawdown strategy by comparing the impact of the following drawdown options:

  • Defensive assets first;

  • Proportional drawdown;

  • Worst performing asset class from previous trial;

  • Best performing asset class from previous trial.

Results:

• Simulation of each portfolio determines which asset allocation and drawdown method have the highest probability of meeting income retirement objective.  

• A probability of running out of funds is returned. 

• A maximum income is provided for a given confidence interval.

• Note: Optimisation is run simultaneously so that for each trial that is performed within the simulation the optimal course of action is taken. This enhances the accuracy of the probability analysis, as dynamic factors such as Centrelink entitlement are automatically recalculated with each trial considered within the model.