As longevity improves, people are more concerned about whether their assets will last throughout their lifetimes. The decline of defined benefit plans and the uncertainty surrounding the future of Social Security have only added fuel. As a result, a groundswell of interest in lifetime annuities is occurring, accompanied by a groundswell of questions about the trade-offs between using an annuity and self-insuring against longevity.
This article addresses two of the commonly asked questions about annuities:
- What advantages does a fixed annuity provide over a bond portfolio earning
the same interest rate?
- What are the trade-offs between a pure lifetime annuity and an annuity with
a guaranteed period certain?
These are two of the topics covered in a research paper by Thomas G. Walsh, former president and CEO of TIAA-CREF Life. Mr. Walsh wrote this paper while a visiting scholar at the TIAA-CREF Institute.
