A finished FIN-355 Topic 7 decumulation stress projection example, running one couple's withdrawals through three orderings of identical growth to age 95 and locating the withdrawal that survives. Searches like "fin 355 topic 7 assignment example", "fin355 topic 7 sample" and "fin-355 topic 7 example" land here.
What a finished FIN-355 Topic 7 decumulation stress projection looks like
An assumptions table leads the finished projection: 800,000 at 65, a first withdrawal of 36,000 taken at the start of each year, withdrawals rising 2.5 percent a year for inflation, and a horizon to 95, every figure illustrative. Three return paths follow, each compounding to the same 5 percent a year over thirty years. At a steady 5 percent the account funds every withdrawal and still holds about 94,000 at 95. When the same growth arrives with losses of 15 and 8 percent in the first two years and a 2 percent gain in the third, the account runs dry at 87. With those poor years moved to the end, about 603,000 remains. Identical average growth produces an eight-year difference in how long the money lasts, decided by order alone. A starting withdrawal near 29,800 survives the worst path.
How a FIN-355 Topic 7 example is structured
The projection is arranged so the assumptions can fail one at a time. The composite couple come first: their savings, the spending the portfolio must fund after Social Security, and why the horizon runs to 95: a plan built to an average lifespan falls short whenever either spouse outlives it. The assumptions table follows, kept apart from any calculation. The first projection runs the steady 5 percent path and reports the balance at five-year intervals. The sequence section reorders the same growth, placing the poor years first and then last, and tables the three paths side by side. A longevity paragraph shows the early-loss path at 85, about 119,000 left, which reads as safe to anyone who stops there. The final section finds the starting withdrawal that survives the worst path and names the spending change it asks of the couple.
Assumptions tabled before any path
Starting balance, withdrawal, inflation, horizon and growth rate sit together in one table, so each can be disputed before a single balance appears.
One average growth, three orders
Every path compounds to 5 percent a year over thirty years, which isolates the order of returns as the only thing that differs between them.
Early losses end the money at 87
Losses of 15 and 8 percent in the first two years leave the account unable to fund the withdrawal due at 87, eight years short of the horizon.
A horizon set past the average
The projection runs to 95 because stopping at an average lifespan reports safety in exactly the outcomes where one spouse lives longest and needs the money.
The withdrawal that survives the worst path
A starting draw near 29,800, about 3.7 percent of savings, lasts to 95 even with the poor years first, and the example prices that cut in spending.
Where marks go in FIN-355 Topic 7
A projection with one rate of return and a fixed end date is the characteristic failure of this topic, because it removes both risks a retirement income plan exists to manage. Papers that model volatility by lowering the average return have tested the level of returns but not their order, so sequence risk goes unmeasured. Stopping at life expectancy reports success while ignoring the outcomes where a spouse lives longest, the very outcomes the plan is for. Flat withdrawals over thirty years leave out inflation, so every path looks sturdier than it is. Mixing start-of-year and end-of-year withdrawals across paths produces differences that come from the convention, not the returns. A projection that finds the plan fragile and stops there, naming no withdrawal level that would hold, leaves the couple with a warning and no decision.
Get a FIN-355 Topic 7 example written to your instructions
Send the FIN-355 Topic 7 instructions and the rubric attached in your classroom, with the retiree case or figures your section supplies. We write a custom example to them, with assumptions tabled apart, the same growth run in several orders, the horizon set past life expectancy and a sustainable withdrawal located, in 24 to 48 hours. The first one is free.
FIN-355 Topic 7 questions, answered
What is sequence-of-returns risk?
The risk that poor returns arrive early in retirement, when withdrawals are selling investments at low prices. Losses in the first years shrink the balance that later recoveries have to work on, so two retirees with identical average returns can end very differently. In the example, the same thirty-year growth ends with about 603,000 left or with the money gone at 87, depending only on when the losses fall.
Why project to 95 instead of to life expectancy?
Because life expectancy is an average, and a plan built to it fails for everyone who lives longer, which for a couple is more likely than not for at least one spouse. Projecting further costs little if the couple dies sooner and protects them if one of them does not. The example uses 95 as an illustrative horizon and says so, since mortality and health differ from household to household.
Does the example say how much a retiree can safely withdraw?
Only for its composite couple and its illustrative paths. The 29,800 figure survives one poor sequence; it is not a universal safe rate, and real retirees face return paths nobody can list in advance, along with taxes, fees and spending that varies. The projection shows the stress testing FIN-355 expects, and your own withdrawal plan deserves a qualified planner working from your actual accounts.