Category Decumulation, Withdrawal Strategy

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 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 […]

Two very different decumulation strategies

Summary This blog post provides additional details associated with a couple of interesting papers I mentioned over the past few weeks. The first is by Sexauer and Siegel proposing a self-executed low-/no-risk approach to retirement planning which aims to deliver DB plan like outcome. The second is Sheikh, Roy and Lester’s dynamic decumulation strategy which […]

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 […]

Optimal withdrawal strategy for retirement income portfolios-A review

In a nutshell: The authors compare five retirement withdrawal strategies (under the constraint that the retiree considers bequests to be of zero importance) and define a measure of Withdrawal Efficiency Rate as a means to compare them. They conclude that the commonly mentioned/used “Constant Dollar” (first year 4% of original assets, then adjusted annually for […]

Comparing strategies for retirement wealth management: Mutual funds and annuities by Pang and Warshawsky

Comparing strategies for retirement wealth management: Mutual funds and annuities by Pang and Warshawsky in the Journal of Financial Planning This was a wonderful, must read and long overdue paper in the latest issue of the Journal of Financial Planning which will help advisers (and sophisticated do-it-yourselfers) better understand available decumulation strategies and the fundamental […]

Withdrawal Strategies in Retirement (expanded)

Withdrawal Strategies in Retirement (expanded) Clearly, unless you are in the fortunate position of having been a longtime employee with an employer providing a guaranteed, generous and indexed pension plan (e.g. you’re a retiree from a government job), withdrawal rates from your accumulated assets will be one of the more stressful decisions that you’ll have […]