PT  - JOURNAL ARTICLE
AU  - Nevenka Vrdoljak
AU  - David Laster
AU  - Anil Suri
TI  - The Role of Variable Annuities in Addressing Retirement Risks
AID  - 10.3905/jor.2014.2.2.055
DP  - 2014 Oct 31
TA  - The Journal of Retirement
PG  - 55--66
VI  - 2
IP  - 2
4099  - https://pm-research.com/content/2/2/55.short
4100  - https://pm-research.com/content/2/2/55.full
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