Annuity Pricing Sensitivity
With all of my discussions of annuities lately, it is worthwhile to also consider the sensitivity of annuity pricing to interest rates, gender and age-related mortality factors. Relationship Between Payout Rates and Interest Rates Figure 1 estimates the relationship between annuity payout rates and interest rates for 65-year old males, females, and opposite-gender couples with […]
Securing Longevity Insurance Through Income Annuities
I have published a few pieces in the past couple weeks on how income annuities are priced and used. Understanding how to use annuities can be a great benefit when planning for retirement. Let’s consider another possibility.
Annuity Pricing 102
In today’s scenario, we’ll see what happens to the price of an annuity if:
1. We guarantee income will be provided for at least 10 years, regardless of whether the annuitant lives.
2. We provide a cash refund if the annuitant dies before at least receiving their full principal payment.
3. We include a cost-of-living adjustment for annuity payments.
Income Annuity 101
How are different types of annuities priced? It’s not as hard as you might think, as the basic recipe requires just three ingredients:
Retirement Income Strategies with Annuities
Income annuities come in a variety of shapes and sizes. It can be overwhelming to know which one makes the most sense for your situation. In this column, I explore how income annuities work and what options are available.
The Value of Financial Advice
I am often asked whether it is worth the cost to hire a financial advisor. After all, they charge you money to make you money. People say they can listen to the news and know where and how to invest, so, “Wouldn’t I be better off just keeping that fee for myself?” That is an excellent question with an answer that depends on many factors.
Safe Withdrawal Rates for Retirement and the Trinity Study
One of the classic studies in the field of financial and retirement planning is the Trinity Study.
How Should Retirement Spending Adjust to Investment Portfolio Performance?
A natural starting point for discussions about retirement spending is the 4% rule. William Bengen look at all the different 30 year periods in US history and found that withdrawing 4% of retirement date assets, and then subsequently adjusting the spending amount for inflation over the next 30 years, would have worked historically as a sustainable strategy.
Sequence Risk vs. Investment Risk
A lot has already been written about the sequence of returns risk confronting retirees. But the full implications of sequence risk have not been completely internalized. Retirees become more vulnerable to investment volatility, because as they withdraw from their portfolio they may find themselves locking in investment losses. It’s the opposite effect from dollar cost averaging.
Lifecycle Finance: An Alternative For A Lifetime Financial Plan
Some of the most common rules of thumb used to guide retirement planning include the following:
Retirees should be able to sustainably withdraw 4% of their retirement date assets over their retirement.
