Annuitization

China's pension system is in need of reform. The current pay-as-you-go system only covers 30 percent of the population and is funded by a 28 percent payroll tax on participating companies. The remainder of the system is unfunded with liabilities that total almost 140 percent of China's current GDP. Boston University Professor Laurence Kotlikoff provides an interesting set of remedies in a recent op-ed piece. Included in Kotlikoff's set recommendations is the notion of mandatory, state-...

Members of Congress and officials from the Departments of Treasury and Labor are working on options that would provide sources of guaranteed lifetime income to participants in 401k and other pension plans. At a high level, it is clear that the Obama Administration wants to create structures and incentives for: Increasing retirement savings. Providing people with the ability to turn those accumulated savings into streams of income that last through retirement. A trial program that would involve...

Warren Buffett's first rule of investing is "don't lose money." His second rule is "don't forget rule number one." In a rather odd whitepaper on retirement planning titled "Risk: How Much is Enough," the financial services firm UBS lays-out a road map of sorts for "moving forward" with retirement planning "in a changed world." What seems clear is that the primary catalyst for the whitepaper is the fact that many financial advisors ignore or forget Buffett's first rule of investing when it comes...

Two industry-leading consultants have published a study that compares a range of wealth management strategies that are available to individuals in retirement. None of the strategies are dominant on an overall basis, but certain approaches show clear strengths in terms of income generation, levels of wealth, and the impact on bequest motives. The dramatic impact of product fees is also addressed. Six different retirement strategies are discussed: Systematic withdrawal from mutual funds. Fixed...

An " in-plan annuity " refers to an annuity option that exists within a 401k plan. The notion of an annuity-based retirement income option within a 401k plan is a relatively new concept. Advocates of in-plan annuities--which include key members of the Treasury Department and Congress--believe that partial annuitization is important for the retirement security of the millions of Americans whose access to stable sources of pension income is largely limited to Social Security . There are, however...