What is the sustainable withdraw rate for Brazil?
Published:
Sep 4, 2023
Volume:
21
Keywords:
Retirement
ALM
Investments
Withdraw rate
Abstract
The consistent increase in longevity and the decrease in birth rates in the Brazilian population have exacerbated the financial solvency of social security funds, threatening the retirement of a significant portion of the population. This study proposes an adaptation of the Trinity (Cooley et al., 1998) model for the Brazilian market, based on the ALM (Asset Liability Management) methodology and stochastic programming. It suggests using a personal investment portfolio as a source of funds during retirement. The study innovates by employing econometric models and simulation to address the typical problem of low data availability for local financial assets. The results indicate that a 5% withdrawal rate is sustainable and relatively safe for annual withdrawals from a portfolio composed primarily of fixed-income assets.
How to cite
Lucas Pereira, Marcelo Scherer Perlin. What is the sustainable withdraw rate for Brazil?. Brazilian Review of Finance, v. 21, n. 3, 2023. p. 37-72. DOI: 10.12660/rbfin.v21n3.2023.89040.