On Dec. 2 the QWeMA Group, a division of CANNEX, announced that the United States Patent and Trademark Office had granted a patent to its method for determining optimal retirement portfolio withdrawal rates in the face of longevity risk. Professors Moshe Milevsky and Huaxiong Huang of York University in Toronto developed the underlying methodology.
In a news release announcing the patent, CANNEX says that the new methodology will help retirees who are living longer and having difficulty meeting their retirement income needs. CANNEX pouts out that not all investors and advisors have an established process for monitoring and adjusting their withdrawal rates. People often rely on general rules of thumb and base annual withdrawals on a fixed percentage (4%, for example) of assets regardless of an individual’s longevity risk. CANNEX warns that this could lead to poor results.
“With this patent, CANNEX is now able to create calculators that will determine a personalized withdrawal rate that not only takes into consideration an individual’s age and risk preferences, but also is consistent with the rational trade off between risk and return,” comments QWeMA president Faisal Habib.