Category Annuities

Spending and risk tolerance in retirement: How much can I spend in retirement?

In a nutshell The risk of outliving retirement savings is a persistent worry of those approaching or in retirement. A tool was built to help answer the “How much you can spend each year without running out of money?” question based on givens (age, assets, income/pension, risk-free rate and tax rate), maximum stock allocation (based […]

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Don Ezra’s “Most people need longevity insurance rather than an immediate annuity” (A review)

 In a nutshell  Ezra argues that the vast majority of retirees will be better of purchasing a longevity annuity rather than an immediate annuity.  He opines that “the so-called annuity puzzle is not a puzzle…(but) if longevity insurance were widely available but still shunned, then that would indeed be a puzzle for social scientists to investigate.” […]

Will that be annuity or lump-sum?

In a nutshell The annuity vs. lump-sum decision is explored as a function of lump sum offered. Qualitative and quantitative considerations are reviewed, as well a tool is provided to allow consideration of: the required break-even return rates and stock allocations under various conditions, the impact of age when 60% (survivor benefit) kicks in, and pensioners’ […]

Annuity/Pension vs. Lump-sum- Part 5: Putting it all together

In a nutshell Putting it altogether, you are now ready to explore your own personal situation for the annuity/pension vs. lump sum decision. If you are reading this Part 5 blog post of the final one of this series, then you have already ploughed through the first four parts: Annuity/Pension vs. Lump-Sum- Part 1: Making […]

Annuity/Pension vs. Lump-Sum- Part 4: Monte Carlo simulation to explore retirement income trade-offs with and without annuitization

In a nutshell In this blog post (Part 4 of this series) we use Monte Carlo simulation to explore the range potential outcomes given assumed Capital Market Expectations, (risk tolerance and corresponding) Asset Allocation, in the context of personal circumstances (Age, Assets, Expenses, Other Lifetime Income sources and the resulting required withdrawal rate) and compare […]

Annuity/Pension vs. Lump-Sum- Part 3: Quantitative considerations

In a nutshell In this blog post (Part 3 in the series), in the context of a specific example for a 67 year old couple, we explore quantitative considerations toward the annuity/pension vs. lump-sum decision, such as: (1) fixed and discretionary expenses, (2) capital market expectations, (3) how/when/if to annuitize, (4) understanding the value delivered […]

Annuity/Pension vs. Lump-Sum- Part 2: Drivers to and away from annuitization

In a nutshell In Part 2 of this series of five blog posts, we approach the annuity/pension vs. lump-sum decision qualitatively to allow individuals to tentatively screen themselves into an annuity or lump-sum direction; in follow-on blog posts we explore quantitatively the decision to annuitize, when it might make sense to do so and how the outcomes […]

Annuity/Pension vs. Lump-Sum- Part 1: Making the right decision for you

In a nutshell In Part 1 of this five part series, the focus is on: (1) risks in retirement, (2) life expectancy and impact on retirement planning age and (3) annuities are insurance not investment The three key risks in retirement are: longevity risk, inflation risk and market risk. Annuities/pensions address some aspect of these risks, while […]

Insured Annuities? Not so fast

In a nutshell “Insured annuity” based un-indexed income is less compelling than a systematic withdrawal of the same size from a balanced portfolio. Monte Carlo simulations suggest that even with a higher 50% indexed draw from the balanced portfolio delivering 3.5% real return, the residual portfolio value is likely to exceed the life insurance payout […]

Annuity or Lump-Sum (LIF): Upcoming Nortel pensioners’ decision

In a nutshell In this blog I address the “annuity or lump sum?” and the  “if, when and how much  to annuitize?” questions with a discussion of the pros, cons and other qualitative considerations that go into this very personal decision. “Annuity or Lump-sum?” One could very simply just take the annuity option (“status quo […]