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Three Questions To Evaluate Longevity Risk For Retirees

Longevity risk—the risk of running out of assets before running out of time—is fundamental to retirement. We know about the distribution of longevity for the overall population, but an individual cannot know in advance precisely where he or she will fall in the distribution.

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.

Why Retirees Should Choose DIAs over SPIAs

My new column at Advisor Perspectives is called, “Why Retirees Should Choose DIAs over SPIAs.” In the past, I’ve written about the efficient frontier of retirement income, finding that retirees can best satisfy twin goals of preserving their lifestyle spending needs in bad luck cases and leaving the potential for upside as well through a […]

Deciphering the Annuity Puzzle

My Advisor Perspectives column for July is now available. It is, “Deciphering the Annuity Puzzle: Practical Guidance for Advisors.” In this column, I explain the economic theory behind the puzzle. The puzzling issue is why people do not annuitize more of their assets at retirement since it removes longevity risk from the equation and allows […]

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