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Abstract
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
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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