Category Decumulation, Withdrawal Strategy

Rebalancing in retirement

In a nutshell The primary application of rebalancing for most DIY investors should be risk management. Most other rebalancing reasons/approaches are essentially active calls on market direction with guaranteed costs without guaranteed benefits. Using appropriate (capitalization weighted) passive broad-market index fund(s), the risky part of the portfolio gets most/all rebalancing achieved automatically; the only required […]

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’ […]

“The only spending rule article you’ll ever need” by Waring and Siegel- A review

In a nutshell Waring and Siegel’s “The only spending rule article you’ll ever need”  proposes a dynamic spending rule based on ARVA or Annually Recalculated Virtual Annuity”. ARVA effectively recalculates each year the income that you would get if you could buy a fairly priced level payment fixed term real annuity based on current: (1) […]

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 […]