Last updated: 2 Dec 23 01:19:01 (UTC)
What the Experts Say about Using Variable Annuities for a Guaranteed Income
"I know of only two ways of coping with equity volatility during retirement withdrawals:
Abiding faith in the historical record, in the greatness of free-market democratic capitalism.
The other method is what the variable annuity industry is pleased to call ‘living benefits’.”
"Insurance companies promise that annuitants won’t run out of income, ever! When there is a living benefit, an annuitant may run out of cash but not out of income.” ―. From the article “The Better IRA” in The Investment Edge magazine.
is a tenured professor at York University. He has a Ph.D. in Finance, a Master of Arts in Mathematics and cum laude from Yeshiva University. He is a lifetime Fellow of the Fields Institute for Research in Mathematical Sciences. Over the last 25 years he has published 15 books and 60 peer-reviewed scholarly articles on wealth and risk management. He currently serves as a member of the editorial boards for the Journal of Pension Economics and Finance (JPEF), and Insurance: Mathematics and Economics (IME).
“It protects against the risk of living beyond, even far beyond, life expectancy - without surrendering either upside potential of liquidity of the underlying portfolio.” ―, Section V from the book (2021).
“The income is guaranteed to never decline for the remaining life of the annuitant. If the underlying investment portfolio ever reaches zero, the guaranteed income will continue so long as the annuitant or, for a joint product, one member of the couple is still alive. Whatever remains in the account at the time of death goes to the heirs.” ―, Section V from the book (2021).
“Fees and periodic withdrawals are deducted from the VA account as long as there are funds available. But if those periodic withdrawals every fully deplete this account, the insurance component is triggered to fulfill the remaining withdrawals for the lifetime of the investor.” ―, Section V from the book (2021).
“… to provide an assortment of lifetime income guarantees meant to protect the policyholder against longevity risk as well as what the industry has coined as ‘sequence-of-returns risk’, which refers to the chance that a retirement portfolio, from which cash is being withdrawn, suffers early losses, magnified by the retiree living longer than average. All you need is a bear market at the wrong time, and the sustainability of your income can be cut dramatically.” ―, Section V from the book (2021).
“Invest aggressively, diversify, exposure to equities, and wrap some protection around it. Optimize your variable annuity by having an aggressive allocation and protecting it with a lifetime income.” ―, from his webinar (2020).
- If the market goes up - you’re a winner.
- If the market goes down - you’re a winner.
- No more disgruntled clients.
“Living Benefits are not new variable annuities, but riders available with existing variable annuities. Often, only a box on the application need be checked to obtain a specific living benefit. Living benefit riders provide long-term investors with:
- An opportunity to obtain stock market gaines if the market goes up.
- An opportunity to obtain an upward ratcheting lifetime stream of income regardless of the stock market’s future direction without annuitization.
- The ability to avoid the ‘longevity problem’ for both spouses.
- The ability to avoid the ‘sequence of return’ trap.
- The advantages of obtaining basic variable annuity benefits (commission-free investing, no transaction costs, death benefit, etc.).”
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