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Abstract
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.
- © 2014 Pageant Media Ltd
Don’t have access? Click here to request a demo
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US and Overseas: +1 646-931-9045
UK: 0207 139 1600