Annuities and the Financial Media – Don’t Believe Everything You Read
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Longevity Risk
The risk of outliving one's assets. In other words, the risk of running out of money during retirement. In most countries, average life expectancy has increased dramatically over the past several decades. Longer lifespans are somewhat of a mixed blessing because of the financial burden associated with more years of retirement. Individuals, insurance companies and governments are exposed to the financial pressures created by the need to finance increasing longevity. Longevity risk is a key challenge for many societies around the world.
The Wall Street Journal's Brett Arends on Annuities
Brett Arends writes a personal finance column for the Wall Street Journal. He is one of the more interesting and popular personal finance writers in the industry. Although a subscription is required to read the Wall Street Journal, Arends' column (among other Journal features) is highly recommended. For the past two weeks, Arends has written columns that focus on annuities. The columns can be accessed by clicking here and here . Both articles are highly recommended. Topics addressed include:...
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Time to Revamp the 401k?
Writing in the Huffington Post, CBS MoneyWatch Editor in Chief Eric Schurenberg says he thinks it is time to consider major changes for 401k plans. His criticisms include: 401k plans randomly create winners and losers. 401k plans leave people poor. 401k plans expose people to longevity risk. Comments on longevity risk include: The shame of this is, longevity risk can be insured away by averaging out the risk over an entire population. Every annuity does this. Why not the national retirement...
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The Business Week Cover Story on Retirement--Life-Cycle in Theory but Status Quo in Practice
Business Week just ran a timely cover story on the post-financial crisis retirement landscape. Portions of the feature present a remarkable contradiction. While there is a clear endorsement of...
Glossary:
Increasing Longevity and Decreasing Assets Make 80 the New 65
The financial crisis has had an enormous impact on the financial plans of millions of people around the world. The savings of millions of retirees and near retirees have taken a huge hit at the worst possible time. This message has become fairly ubiquitous in the financial media. However, the message that has not been as clear involves longevity risk. The reality is that average lifespans are headed in the opposite direction from the levels of saving required to fund those golden years...
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