Optimizing Annuity Income Benefits—A Case Study
June 11, 2019 by Eva L. Levine
Countless surveys and studies have established that many Americans are concerned about running out of money in retirement because people are living longer, and that there is growing recognition that annuities are a critical part of retirement income planning because of their lifetime income characteristic, which can serve as an insurance against longevity. Yet there are few guidelines on how annuities should be utilized in order to achieve the goal of maximizing the income potential of a retiree’s retirement savings.
A case study was undertaken to address three questions that would determine the optimal use of annuities for retirement income. The first question addresses how much income can be expected from annuities designed for lifetime guaranteed income; the second question addresses which type of annuities would be best for retirement income; and the third question addresses how much retirement savings should be allocated to annuities to ensure against running out of money in retirement.