Comments on: Retirement and Longevity Risk: The Solution

By: DrShelby

DrShelby — Mon, 28 Sep 2009 16:18:30 +0000

Bobby, We are in total agreement. The greatest fear of most retirees is outliving their money…and the insurance industry has the answer for those willing to consider all their options. The ISNHW provision for 401(k) plans is going to becoming a hot topic in 2010 when many high income workers want to convert all or some of their 401(k) money to Roth IRA but find out it is not available for transfer.

By: Bobby

Bobby — Sun, 27 Sep 2009 18:40:36 +0000

Having a policy that covers you for the length of your lifetime is important. People are living longer and healthier. Let’s face it, the older you get, the more security you need. Options become more and more limited as we age so the more guaranteed income the better. Th ISNHW provisions are another option that can help with retirement planning. It is good to know the all the facts before you make a decision.

By: DrShelby

DrShelby — Tue, 04 Aug 2009 12:00:05 +0000

Paul, I couldn’t disagree more. It is obvious you’re not “up to speed” on the new generation of annuities. The “old specie” required annuitization for a guaranteed lifetime income whereas the “current generation of annuities” does not. In recognition of baby boomers added on top of an exploding retired population, insurance companies have changed annuities to address the fear of outliving your retirement money, i.e., longevity risk. You can trigger the guaranteed lifetime income rider without giving up the flexibility of changing your mine and stopping, restarting or even withdrawing lump sum. The one thing you are missing is the “no loss” feature of annuities. The 4% withdrawal scheme you mentioned has been totally debunked in recent years, so obviously you of the “old school”. With your plan you have market risks, fees (unless you provide your services at no charge) and you still have not addressed longevity risk.

To remind you, longevity risk is the risk of living too long – and regardless of how much money you have in “diversified” places there are lots of reasons you can run out of money before you run out of breath: market losses and medical emergencies to name a couple. If you’ll be so kind to compare a fixed index-linked annuity with a Guaranteed Lifetime Income Benefit with a diversified portfolio of whatever market securities you want to select over the period 1995 to present, you’ll clearly see the advantages I’ve spoken about. While I agree that early in your life market risks are just fine because you’ll have time to recover unfavorable market development, such luxury is not available as your enter the red zone or retirement because you simply may not have time to recover as the past two decades as proven. The “4% rule” and “in the long run you’ll do better in the market” are simply no longer reliable…sorry.

Shelby Smith, Ph.D.

By: Paul

Paul — Mon, 03 Aug 2009 17:29:02 +0000

I have never been a fan of annuities no matter how they are presented. They add increased costs, do not normally protect against inflation, do not necessarily do a better job investing than the average investor does, and can be twice as confusing as investing prior to retirement was.

People should keep their money where they can get it should they need it. Once its annuitized, any change in financial circumstance is simply impossible to address without penalties, fees and added costs. Roll it over to an IRA or a Roth and keep it close.

The only sure way to ‘insure’ yourself from longevity risk and ensure you won’t run out of money is to set your retirement investment focus on a 4% withdrawal rate while you are still working and diversify for your age. Do those two simple things and you will not need to worry about outliving your money.