Category Retirement Finance

“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 […]

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 […]