Retirement Portfolio

A portfolio in which the objective is retirement income with the possibility of steady erosion of the portfolio's values.

Withdrawal Rate

The amount of cash withdrawn from the portfolio during (or at the end of) the 1st year of liquidation as a percentage of the portfolio's value at the start of the liquidation period.

Withdrawal Strategy

The process by which withdrawals will be adjusted once the withdrawal process has started.

Flat Annuity

An annuity in which case withdrawals are set at a fixed dollar amount per year.

Inflation-Adjusted Annuity

An annuity in which the objective is to have withdrawals grow each year at the rate of inflation.

Performance-Based Annuity

An annuity in which the withdrawal each year is based on the portfolio's performance during the previous year.

Portfolio Failure

Defined as having the portfolio's value be less than or equal to an intended withdrawal, thus creating a final withdrawal that will zero out the portfolio.

Capital Preservation Model

A capital needs analysis method that assumes that, at life expectancy, the client has exactly the same account balance as he or she did at retirement.

Purchasing Power Preservation Model

Attempts to have the purchasing power of the portfolio at life expectancy equal the purchasing power of the portfolio at the time of retirement.

Portfolio Success Rate

A function of portfolio composition and withdrawal rates; can be defined as 100% minus the portfolio failure rate.