Achieving Retirement Income Security: A Comparison of Guaranteed Lifetime Withdrawal Benefit, Systematic Withdrawal and Partial Variable Annuity Strategies

27 Pages Posted: 29 Jan 2019

See all articles by Benjamin Goodman

Benjamin Goodman

Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF)

David P. Richardson

TIAA-CREF Institute

Date Written: May 1, 2016

Abstract

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

Goodman, Benjamin and Richardson, David P., Achieving Retirement Income Security: A Comparison of Guaranteed Lifetime Withdrawal Benefit, Systematic Withdrawal and Partial Variable Annuity Strategies (May 1, 2016). Available at SSRN: https://ssrn.com/abstract=3317778 or http://dx.doi.org/10.2139/ssrn.3317778

Benjamin Goodman

Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF) ( email )

730 Third Avenue
New York, NY 10017-3206
United States

David P. Richardson (Contact Author)

TIAA-CREF Institute ( email )

8500 Andrew Carnegie Blvd
E3/S8
Charlotte, NC 28262
United States

HOME PAGE: http://https://www.tiaa-crefinstitute.org/public/institute

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