Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOR
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Retirement
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Retirement

The Journal of Retirement

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOR
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Distribution Methods for Assets in Individual Accounts for Retirees: Life Income Annuities and Withdrawal Rules

Mark J. Warshawsky
The Journal of Retirement Fall 2015, 3 (2) 105-122; DOI: https://doi.org/10.3905/jor.2015.3.2.105
Mark J. Warshawsky
is a visiting scholar at the Mercatus Center at George Mason University in Arlington, VA. He is also a visiting fellow at the MIT Sloan Center on Finance and Policy in Cambridge, MA, and president of ReLIAS LLC in Silver Spring, MD.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: mwarshawsky@mercatus.gmu.edu
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 

Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

This article examines the two basic, opposing methods of how to pay out assets from 401(k) plan accounts and IRAs to retired workers. The first method is the immediate life annuity, and the second is a rule to withdraw a fixed percentage of 4% of the initial account balance, increased each year after the first year by the rate of inflation. The lifetime income levels and risks these methods produce are calculated using a historical simulation of asset returns, interest rates, and inflation, as well as recent data on the pricing of immediate life annuities. This article is the first to conduct this comparison using a standard methodology over a long time period.

The life annuity is judged to be an effective instrument to produce lifetime retirement income—generally somewhat better than the commonly used withdrawal rules, in terms of a usually much higher level of income and lower risk of running low on resources. The life annuity is subject to inflation risk at longer horizons and lacks liquidity and bequest value. Given the desirability of balancing the advantages and disadvantages of the two methods, the optimal strategy would seem to combine the methods, ideally reflecting the unique preferences and situation of each retired household.

TOPICS: Retirement, wealth management

  • © 2015 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Retirement: 3 (2)
The Journal of Retirement
Vol. 3, Issue 2
Fall 2015
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Retirement.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Distribution Methods for Assets in Individual Accounts for Retirees: Life Income Annuities and Withdrawal Rules
(Your Name) has sent you a message from The Journal of Retirement
(Your Name) thought you would like to see the The Journal of Retirement web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Distribution Methods for Assets in Individual Accounts for Retirees: Life Income Annuities and Withdrawal Rules
Mark J. Warshawsky
The Journal of Retirement Oct 2015, 3 (2) 105-122; DOI: 10.3905/jor.2015.3.2.105

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Distribution Methods for Assets in Individual Accounts for Retirees: Life Income Annuities and Withdrawal Rules
Mark J. Warshawsky
The Journal of Retirement Oct 2015, 3 (2) 105-122; DOI: 10.3905/jor.2015.3.2.105
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • LITERATURE REVIEW
    • METHODOLOGY
    • EMPIRICAL RESULTS
    • PUBLIC POLICY AND STRATEGY DESIGN ISSUES
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • Top-Up Contributions to Social Security
  • A Social Security "Annuity Purchase": Is Delaying Social Security More Effective than Purchasing a Deferred Income Annuity?
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2022 Pageant Media Ltd | All Rights Reserved | ISSN: 2326-6899 | E-ISSN: 2326-6902

  • Site Map
  • Terms & Conditions
  • Cookies
  • Privacy Policy