  We extend the Annually Recalculated Virtual Annuity (ARVA) spending rule for
retirement savings decumulation to include a cap and a floor on withdrawals.
With a minimum withdrawal constraint, the ARVA strategy runs the risk of
depleting the investment portfolio. We determine the dynamic asset allocation
strategy which maximizes a weighted combination of expected total withdrawals
(EW) and expected shortfall (ES), defined as the average of the worst five per
cent of the outcomes of real terminal wealth. We compare the performance of our
dynamic strategy to simpler alternatives which maintain constant asset
allocation weights over time accompanied by either our same modified ARVA
spending rule or withdrawals that are constant over time in real terms. Tests
are carried out using both a parametric model of historical asset returns as
well as bootstrap resampling of historical data. Consistent with previous
literature that has used different measures of reward and risk than EW and ES,
we find that allowing some variability in withdrawals leads to large
improvements in efficiency. However, unlike the prior literature, we also
demonstrate that further significant enhancements are possible through
incorporating a dynamic asset allocation strategy rather than simply keeping
asset allocation weights constant throughout retirement.
