Achieving Retirement Income Security: A Comparison of Guaranteed Lifetime Withdrawal Benefit, Systematic Withdrawal and Partial Variable Annuity Strategies
27 Pages Posted: 29 Jan 2019
Date Written: May 1, 2016
Many retirement income products attempt to satisfy multiple and sometimes conflicting objectives because retirees desire products that provide retirement security, inflation protection, liquidity, asset growth and the potential for an estate. In this paper, we used historical data over the past 90 years to conduct simulations and analyze how a Guaranteed Lifetime Withdrawal Benefit (GLWB), systematic withdrawal, and partial Variable Immediate Annuity (VIA) strategies performed in meeting these multiple objectives. With the exception of retirement income starting dates at the beginning of the Great Depression, all three strategies performed well in providing income throughout retired life. The partial VIA and GLWB strategies provided better “peace of mind” retirement income products, while the systematic withdrawal strategy offered the greatest flexibility in managing retirement assets. Overall, we conclude that a partial VIA income strategy comprised of a VIA and supplemental liquid asset account would have provided the best mixture of income generation, risk management, and estate potential for the majority of cohorts.
Keywords: Annuity, Retirement
JEL Classification: D14, D91
Suggested Citation: Suggested Citation