Annuity

An annuity comes in many forms, but a simple definition is that an annuity is a contract that converts a sum of money into a series of periodic payments for an agreed upon period of time. An annuity can be thought of as a financial vehicle that converts a pool of money into a stream of income. Annuities are most useful in addressing the financial planning needs of people in or approaching retirement. Annuities are unique in the financial world because they can provide protection against the risk or outliving one’s assets (longevity risk) by guaranteeing income payments in perpetuity or any other selected amount of time. Annuities can be viewed as a type of personal pension plan. Social Security is similar to an annuity in that money contributed over the course of one’s working years is converted into a series of periodic payments that provide income during retirement.

Variable Annuity Hedging Programs Holding Up Well

The hedging programs used by insurance companies to support the guaranteed living benefit features in their variable annuity products have held-up well recently. Milliman reports that insurance companies supported 94% of their guarantees for the six month period ending in March 2009. The success of the hedging programs and the highly volatile capital market environment have encouraged many insurers to increase their hedging efforts. As reported in an earlier post , the increase in hedging...

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Annuity

Capital Market

Guaranteed Living Benefit

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Annuity

Capital Market

Guaranteed Living Benefit

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Federal Reserve Chairman Bernanke's Variable Annuity Loses Value in 2008

The wealth of Federal Reserve chairman Ben Bernanke decreased to $850,000 - $1.9 million at the end of 2008 from the $1.2 million - $2.5 million range in 2007. The financial crisis took a toll on most of chairman Bernanke's asset holdings. Particularly hard hit, though, was the variable annuity that is owned by chairman Bernanke: "Much of Mr. Bernanke's decline came from a large-cap stock variable annuity he holds, whose value dropped from between $500,000 and $1 million at the end of 2007 to...

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Money Magazine on Immediate Annuities

There is a good article on the use of immediate annuities by Walter Updegrave who is a senior editor at Money Magazine. The article discusses how to think about an immediate annuity in light of other guaranteed payments from Social Security or a pension plan . Laddering of annuity purchases is discussed. Age and timing of an annuity purchase is addressed, as is the concept of the mortality yield or mortality credit . Source: Money Magazine Full Story

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Part Two of the Interview with Wharton Professor David Babbel

This is the second part of an interview with Professor David Babbel.

Part one can be found here.

Annuity Digest: Which study results were most surprising to you? I assume you went into the study with firm views on the non-normality of asset returns. Given that, was it: a) short-run comparative results...

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Sequence of Returns Effect