[rgoddard]

Being risk-adverse with retirement spending is perfectly rational. Most people will have to take into minimum expense amounts. Pursuing a strategy which will have the more likely outcome of not being able to pay your minimum expenses would not make sense for many people. Comparing only the expected values without including the volatility is an incomplete comparison.

The critique is aimed at the assumption that your risk aversion is scale invariant. i.e. you behave the same when the values are in the 10s of dollars, or the 10,000s of dollars. I might be perfectly fine with taking the coin flip when the outcomes are either $10 or $15, but if the outcomes are $10,000 or $15,000 I might rather take a lower guaranteed amount of $12,000 because that will meet my expenses but the $10,000 won't.

[RockyMcNuts]

Fair enough, but for this retirement problem you're comparing outcomes within 1-2 orders of magnitude. If you don't have scale invariance you'll get a different answer if you put in $100K, $1m and $10m starting portfolios, but that difference wouldn't tell you anything useful.

IMO best way to look at γ is an arbitrary tunable smoothing parameter, just tune it until it looks like what you're most comfortable with, trading off smoothness for maximizing cash flow.

[femto113]

Might be addressable by solving two scenarios. The first is a highly-risk-averse approach to meeting your minimum needs, the second would be a risk-indifferent approach to investing anything left over. To put it into the coin analogy if your minimum need was $11 but the guaranteed rate is $12 you could take the $12 but then immediately flip again with the left over dollar and get an average of $1.25 with it, for a total return of $12.25.