Category Annuities

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 […]

Pure longevity insurance payout option in CPP would reduce retirees’ longevity risk

Adding a pure longevity insurance payout option to the CPP would go a long way to ease the pain of private sector employees with disappearing pensions. This blog adds some meat to the proposal I mentioned in last week’s PRPP or expanded CPP? Consider adding a pure longevity insurance payout option to the CPP. The PRPP doesn’t meet […]

Longevity Insurance- What does it buy you?

Longevity Insurance- What does it buy you?   As mentioned often, retirees are exposed to three major risks: (1) longevity risk, (2) inflation risk and (3) market risk. In many ways these three risks are intertwined and they all lead to the possibility of running out of money and/or significantly reduced standard of living before […]

Longevity Insurance (Delayed Payout Annuities)

Longevity Insurance (Delayed Payout Annuities): Forget About Immediate Annuities- The Most Efficient Annuitization is 5-10% of Wealth Allocated to Longevity Insurance!   Scott, Watson and Hu in their Pension Research Council paper “Efficient Annuitization: Optimal Strategies for Hedging Mortality Risk” prove what readers of this website have heard from me many times before (though expressed only […]

Annuities IV

Annuities IV     So there are no simple rules to decide if an annuity is appropriate for you. As a general statement, I can see no compelling reason to start considering annuities as part of a retirement plan, until there is better disclosure of the fees and charges that go into the pricing of annuities […]