PT - JOURNAL ARTICLE AU - Moshe A. Milevsky AU - Steven E. Posner TI - Can Collars Reduce Retirement Sequencing Risk?<br/> <em>Analysis of Portfolio Longevity Extension Overlays (LEO)</em> AID - 10.3905/jor.2014.1.4.046 DP - 2014 Apr 30 TA - The Journal of Retirement PG - 46--56 VI - 1 IP - 4 4099 - https://pm-research.com/content/1/4/46.short 4100 - https://pm-research.com/content/1/4/46.full AB - Practitioners are well aware of the pernicious effect of the “sequence of investment returns” on retirement income sustainability. Poor markets early in the withdrawal phase increase the “lifetime ruin probability” and reduce the longevity of a portfolio. In this article, the authors investigate how and when traded equity options can be used to extend the life of a retiree’s investments. They label this class of strategies longevity extension overlays (LEOs) and use simulation techniques to analyze the strategy’s theoretical properties. They also provide evidence on the efficacy of simple LEOs during the 2007–2013 period. Our results are encouraging and offer a justifiable alternative for wealth managers who want to avoid using (more complex and opaque) insurance-product solutions.TOPICS: Retirement, options, simulations