May 2, 2011
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Ken French says the simplest answer is found in the rate offered on a long-term Treasury Inflation Protected Security (TIPS). You can go beyond the TIPS rate if you don't plan to live forever. Retirees with a shorter life expectancy might choose to consume more. Finally, you might increase your expected investment return and your expected sustainable withdrawal rate by taking more risk. But Ken warns that the expected return and the return you ultimately receive could be very different. That is the nature of risk.
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ABOUT FAMA AND FRENCH
Eugene F. Fama
The Robert R.
McCormick Distinguished
Service Professor of
Finance at the University
of Chicago Booth School
of Business
Kenneth R. French
The Carl E. and Catherine
M. Heidt Professor of
Finance at the Tuck
School of Business at
Dartmouth College
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Dimensional Fund Advisors Ltd. is authorised and regulated in the United Kingdom by the Financial Services Authority (FRN: 150100), is registered in England and Wales under Company No. 02569601 and VAT No. 577327607. The registered office address of Dimensional Fund Advisors Ltd. is 7 Down Street, London, W1J 7AJ, United Kingdom. Dimensional Fund Advisors Ltd. is a subsidiary of Dimensional Fund Advisors.