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Cecilica Chungcecilica.chung@morningstar.com
Morningstar Research Identifies A Withdrawal Rate for Japanese Retirees

TOKYO, 8 May 2017—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today released new research that identifies a lower safe withdrawal rate for retirees in Japan. For this research, Morningstar defined a safe withdrawal rate as the amount a retiree can withdraw each year while safely expecting their savings to reach the end of retirement. The paper, “Safe Withdrawal Rates for Japanese Retirees Today,” finds that Japanese retirees using a traditional 4% withdrawal rate against their initial retirement savings are at increased risk of experiencing a shortfall in their capital.

Against the backdrop of rising longevity and low investment return expectations in Japan, Morningstar identified a safe withdrawal rate that accounts for the unique market conditions faced by retirees in Japan today and that supports advisers in conversations with clients, many of whom will be considering the drawdown of their pension savings for the first time. Morningstar’s research identified a safe Japan withdrawal range beginning at 2.5% or 3%—less than the frequently used 4% rate.

“The investment industry has long referred to a safe withdrawal rate of 4 per cent and we wanted to find out if this is a reasonable assumption for current retirees in the Japan,” Katsunari Yamaguchi, Chairman for Ibbotson Associates Japan, an affiliate of Morningstar and co-author of the report, said. “Most studies on the topic have been conducted for U.S. investors using U.S. data, and it was increasingly dangerous to leave this assumption unchecked given Japanese investors differ from their U.S. counterparts in terms of personal characteristics, typical investments, and basic old-age government benefits. Therefore, estimating a Japan-relevant safe withdrawal rate based on our current return and risk expectations for Japan is key to helping those individuals manage their retirement savings.

“The generous investment returns of the last century that supported a comfortable and long-lasting retirement portfolio for previous generations of retirees are no longer with us,” Yamaguchi continued. “In the current environment of low yields, clients and their advisers need to set realistic return expectations. We hope this analysis provides advisers with a framework to use with clients when considering the question of retirement spending.”

Morningstar anticipates the report will also assist advisers in helping their clients in the earlier stages of their financial planning by providing a more realistic estimate of the capital required to deliver a desired income level in retirement.

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Notes to Editors
To access the report, “Safe Withdrawal Rates for Japanese Retirees Today,” please click here.
To speak to the report’s authors, please contact cecilica.chung@morningstar.com.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than USD 200 billion in assets under advisement and management as of 31 March, 2017. The company has operations in 27 countries.

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