In retirement (the distribution phase), a market downturn can quickly shrink your savings and make it almost impossible to recover. You need different strategies to help your money last.
See below for examples of how a market downturn can result in different outcomes based on your goals (accumulation vs distribution).
In retirement (the distribution phase), a market downturn can quickly shrink your savings and make it almost impossible to recover. You need different strategies to help your money last. See below for examples of how a market downturn can result in different outcomes based on your goals (accumulation vs distribution).
The accumulation experience
During accumulation, although there was a bear market early on, maintaining discipline and staying invested allowed the account to recover and continue to grow.
Hypothetical account value beginning in year 20003
Based on historical values starting in 2000, to illustrate sequence of return risk during the distribution phase
The distribution experience
During distribution, even with the same investment mix and market conditions as the accumulation example, it can be difficult for the portfolio to recover from market volatility.
Hypothetical account value beginning in year 20003
Based on historical values starting in 2000, to illustrate sequence of return risk during the distribution phase
Past performance is not a guarantee of future results.
The illustrations reflect a general view of all retirement accounts including both qualified and nonqualified accounts. Taxes and contribution limits are not reflected.
1 Market volatility content uses the GAAC 8-15 strategic asset allocation, due to the accumulation phase demonstration. The Ensuring Lifestyle>Asset Allocation content uses the GAAC Retirement strategic asset allocation to showcase asset allocation thought leadership during retirement.
2 Contributions and withdrawals calculated at the end of each period. Allocation/portfolio rebalanced monthly.
3 The data begins at year 2000 as this was the start of a highly volatile market period. This helps illustrate the real risks to retirement savings when accumulating savings vs distributing savings.
| 100% Fixed Income | Conservative | Moderately Conservative | Moderate | Moderately Aggressive | Aggressive | 100% Equities | |
|---|---|---|---|---|---|---|---|
| FTSE Treasury Bill 3 Mon USD | 2% | 2% | 2% | 2% | 2% | ||
| Wilshire Liquid Alternative TR USD | 5% | 5% | 5% | 5% | 5% | ||
| Bloomberg US Universal TR USD | 100% | 75% | 55% | 35% | 20% | 4% | |
| MSCI ACWI Ex USA NR USD | 2% | 8% | 14% | 19% | 27% | 25% | |
| Russell 3000 TR USD | 16% | 30% | 44% | 54% | 62% | 75% | |
| Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% |