"Retirement Income: Managing Longevity Risk in Pursuit of Desired Outcomes"
March 28, 2011
Interesting. I had not known about "stand alone living benefits".
To illustrate the mechanics of a SALB, an insurance company may guarantee a 5% withdrawal payment for life based on the highest value of a retiree’s investment account. Should the investment account become depleted while the retiree is still alive, the insurer would then begin making the annuity payments for the remainder of the insured’s life. Retirees who live long or experience a bear market, may be glad they bought this extra protection on their investment account.
Also on retirement, making an excellent point, is "With Retirement Savings, It’s a Sprint to the Finish".
The problem is that even if you do everything right and save at a respectable rate, you’re still relying on the market to push you to the finish line in the last decade before retirement. Why? Reaching your goal is highly dependent on the power of compounding — or the snowball effect, where your pile of money grows at a faster clip as more interest (or investment growth) grows on top of more interest. In fact, you’re actually counting on your savings, in real dollars and cents, to double during that home stretch.
But if you’re dealt a bad set of returns during an extended period of time just before you retire or shortly thereafter, your plan could be thrown wildly off track. Many baby boomers know the feeling all too well, given the stock market’s weak showing during the last decade.