RT Journal Article
SR Electronic
T1 Combining Conventional Investing with a Lifetime Income Guarantee: <em>A Blueprint for Retirement Security</em>
JF The Journal of Retirement
FD Institutional Investor Journals
SP 45
OP 59
DO 10.3905/jor.2019.1.047
VO 6
IS 4
A1 Thomas L. Totten
A1 Laurence B. Siegel
YR 2019
UL https://pm-research.com/content/6/4/45.abstract
AB Both retirees and their employers can benefit from combining conventional DC-type savings plans, designed to be spent down in the early part (say, the first 20 years) of retirement, with a DB-like or deferred life annuity component guaranteeing income for the rest of the retiree’s life in order to hedge the risk of living too long. Earlier authors proposed to do this using a riskless investment strategy, and we build on their work by asserting that the DC-type investment will (and should) include equities. Through simulation, we show that either a high-risk (equity-heavy) or low-risk (fixed-income-heavy) DC component plus a deferred annuity component dominates a conventional DC spend down, from the standpoint of generating sustainable retirement income in most states of the world.TOPICS: Retirement, portfolio construction, legal/regulatory/public policy