2012-07 The Retirement Risk Zone: A Baseline Study

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Description Type



The retirement risk zone is commonly defined as the final decade of working life and the first decade of retirement. This paper undertakes a baseline study to explore the heady mix of the portfolio size effect (when the bulk of retirement savings are in play) and sequencing risk (the timing of a nasty market event) facing superannuants within this zone. The baseline approach adopted in this paper explores one idea, specifically, the impact on retirement outcomes when portfolios are subjected to a single sequencing risk event at different points through the members’ investing life. We report sensitivities between the timing (or sequence) of a negative return event on terminal wealth outcomes and associated impact on longevity risk. Finally, we find an asymmetry in the impact of sequencing risk across the pre-and post retirement phases, suggesting that great priority needs to be given to the issue of sequencing risk earlier in the members’ accumulation phase (say, 15 to 20 years prior to retirement) than convention suggests.


Brett Doran, Michael E. Drew, Adam N. Walk

Contributor Name

Alexandr Akimov

Contributor Role



Griffith Business School

JEL Classification

G11 - Portfolio Choice; Investment Decisions, G23 - Pension Funds; Other Private Financial Institutions; Institutional Investors


Retirement risk zone, Sequencing risk, Longevity risk

Data Format


Resource Type

Discussion Paper


13 pages


1836-8123, RePEc:gri:fpaper:finance:201207

Identifier Type

ISSN, RePEc Handle ID


Copyright © 2010 by author(s). No part of this paper may be reproduced in any form, or stored in a retrieval system, without prior permission of the author(s).