Rebalancing Versus Buy-and-Hold for Financial Sustainability During Retirement Decumulation: Evidence from a Cross-Country Analysis

Abstract

Population ageing and the growing importance of private savings in financing retirement have increased interest in identifying investment strategies that enhance portfolio sustainability and risk-adjusted performance during the retirement decumulation phase. This study examines whether threshold-based rebalancing improves portfolio sustainability relative to a buy-and-hold strategy. Using historical equity and government bond returns for Spain, the United States, and Japan, the analysis considers alternative asset allocations, sustainable withdrawal rates (SWRs), and rebalancing thresholds over a 25-year retirement horizon. Strategy performance is evaluated using two complementary indicators: the average number of years of portfolio sustainability and a risk–return ratio. The results show that intermediate rebalancing thresholds generally provide the most favourable balance between sustainability, return, and risk, although the effectiveness of rebalancing depends on the SWR, portfolio allocation, and the characteristics of the market under consideration. The study provides new empirical evidence on the effectiveness of threshold-based rebalancing during the retirement decumulation phase and offers practical insights for portfolio management and retirement financial planning. The findings are also relevant for public policymakers, providing evidence that may support the design of strategies aimed at helping individuals maintain an adequate standard of living throughout retirement decumulation phase.