RESEARCH MAGAZINE

Moshe Milevsky's Monthly Series "Annuity Analytics"   A Column About Retirement-Related Finance Issues

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Age-Old Lessons From Japan

Japanese consumers have one of the highest rates of life insurance penetration in the world – it is estimated that over 90% of households have some form of insurance. Why have life insurance companies been so successful in Japan? The answer is contained in this lesson on retirement income planning.

A Truly Relevant Benchmark

When it comes to assessing performance of retirement income portfolios, the existing benchmarks and indices — whether we consider the S&P 500 or the broader Russell 3000 or even the MSCI family — all fall short.

It is time to create and promote an index that is geared towards systematic income plans as opposed to buy-and-hold accumulation plans. The index must account for both market performance and the maximum lifetime spending rate that can be obtained without incurring any longevity risk.

Truth in Retirement-Product Labeling

Most readers of this column know that the annuity is one of the most misunderstood — and often abused — terms in the lexicon of retirement income planning.

To bring structure to this rapidly-evolving market, I think it is time for insurance companies and other product manufacturers to start reporting the nutritional content of their annuity creations in a limited and standardized format.

The financial labels should disclose the amount of longevity insurance, mortality credits, stock market crash protection, and other factors contained within any and all annuity products. So what’s inside your annuity?

Back to Basics

This column goes “back to basics” to examine the benefits of pure tax deferral in the accumulation phase of retirement planning, independent of the guarantees and likely benefits available in the income stage. Which tax scenario is better, and when?

How Risky is Longevity?

In the practice of retirement income planning, financial advisors routinely toss around survival probabilities for clients — “there’s a 10 percent chance you’ll live to 100” or “there’s a 50 percent chance one of you will reach 90.”

But the truth is that working out these sorts of odds is more subtle and problematic than is commonly acknowledged. In this article I’ll delve more deeply into longevity risk and argue that it’s actually much riskier and less knowable than you might think.

How Much to Allocate to Annuities?

What if a client asks you how much of a nest egg should be invested in an annuity product versus regular mutual funds? This is not a portfolio asset allocation question. Instead, it's what I like to label a product allocation question.

In an attempt to get some traction in discussing these issues, this column offers some recommendations on the product allocation aspect of retirement income planning.

What is a Guaranteed Rate Really Worth?

This inaugural article is devoted to explaining the arithmetic of GLiB variable annuities correctly. Is the marketing material for your VA speaking “investment Celsius” to human beings who are hard-wired to understand “economic Fahrenheit”?

Frustrations of a Variable Annuity Advocate: 5 Big Ideas

In my mind, it is a great shame that the insurance industry has not taken advantage of the recent unprecedented dislocations of the “Category 11” financial storm we’ve lived through to make fundamental changes to the entire annuity product line. With that thought in mind, here is my “wish list” for structural changes to the personal pension business.