Wade Pfau, Ph.D., CFA, RICP®

Improving Retirement Outcomes with Investments, Life Insurance, and Income Annuities

Next, read 7 Risks of Retirement Planning.

I recently wrote a white paper on improving retirement income by combining Actuarial Science and Investments.

Financial goals for retirement generally include meeting spending goals sustainably, while also preserving assets for contingencies and legacy. The financial services industry offers different tools for meeting these objectives, ranging from investment portfolios to insurance products. While some view these choices as either/or, what I have found in my research is that integrated approaches which draw from both investments and insurance can create more efficient retirement outcomes. That is, certain approaches to building retirement income strategies offer more spending AND greater legacy.

I have completed a new whitepaper for OneAmerica, ”Optimizing Retirement Income by Combining Actuarial Science and Investments,“  which looks at how life insurance fits into the picture with investments and income annuities for a retirement income plan. Because this research is sponsored by an insurance company, I take special care in the whitepaper to explain my methods and assumptions as clearly as possible, so that readers can potentially challenge my conclusions. I say this because the conventional wisdom has become to “buy term life insurance and invest the difference,” and my findings do not support this.

What I find is that integrating whole life insurance into a retirement income plan can create more efficient outcomes in terms of income and legacy. It is very difficult for financial markets to perform well enough for an investments-only retirement income plan to provide better outcomes than an integrated plan that includes risk pooling through life insurance and income annuities.

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Next, read 7 Risks of Retirement Planning.

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