RT Journal Article
SR Electronic
T1 The Role of Variable Annuities in Addressing Retirement Risks
JF The Journal of Retirement
FD Institutional Investor Journals
SP 55
OP 66
DO 10.3905/jor.2014.2.2.055
VO 2
IS 2
A1 Nevenka Vrdoljak
A1 David Laster
A1 Anil Suri
YR 2014
UL https://pm-research.com/content/2/2/55.abstract
AB Investors commonly fund their retirement through portfolios of stocks and bonds or mutual funds, which offer scant protection against the risk of a market downturn or of outliving their wealth. This article examines how adding a variable annuity with a guarantee lifetime withdrawal benefit (VA + GLWB) to a balanced portfolio can help reduce the risk of running out of money in retirement. It quantifies, through simulation analysis, the degree to which an allocation to a VA + GLWB can help mitigate two key retirement risks: longevity and sequence of returns risk. This risk reduction comes at the cost of a decrease in the expected future bequest. The article also explores how the timing of withdrawals and the asset allocation within a VA + GLWB impacts retirement outcomes.TOPICS: Retirement, fixed income and structured finance, risk management