The S&P Shift to Retirement Income and Decumulation (STRIDE) Index Series incorporates an innovative risk management framework focused on providing increasing levels of clarity and stability around sustainable annual consumption in retirement. This paper tests S&P STRIDE’s approach to consumption risk management and asset allocation over the period 2003 to 2016. In this analysis, we evaluated the performance of an income-focused approach relative to traditional TDFs, a popular method of investing for retirement. When evaluated in wealth units, we observed differences in performance but found little information about the effectiveness of either approach to provide clarity or certainty around consumption in retirement. When evaluated in a consumption unit framework, we saw meaningful differences between the two approaches. As a tool to help manage the relevant risks, the S&P STRIDE Glide Path 2010 Index can provide meaningful information about estimated levels of consumption in retirement, whereas the Average 2010 TDF showed large swings in expected retirement consumption. Evaluating the effectiveness of retirement solutions in consumption terms also helps to understand the benefits of using an income-focused approach to meet retirement consumption goals.
Authors: Smita Chirputkar, Director Global Research & Design, S&P Dow Jones Indices; Massi De Santis, PhD, Vice President, Dimensional Fund Advisors; Christine Lubieniecki, Senior Associate, Dimensional Fund Advisors; Philip Murphy, CFA, Vice President, S&P Dow Jones Indicesview more white papers
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