Guarantees v. Control

My friend Wade Pfau has some new material available at his blog concerning the trade-offs between income guarantees on the one hand and personal control of one’s assets on the other as they relate to retirement income planning.  I have linked them below.  As usual, Wade’s work in both interesting and helpful.  As Wade notes, “It seems like retirement income strategies boil down to where you want to fall on the spectrum between having control of your assets and hav[ing] guaranteed (inflation-adjusted) protections for life.” 

I agree.  But I would add that more control over one’s assets necessarily means being more susceptible to random — potentially negative and perhaps disproportionately negative (on account of statistical “fat tails”) — outcomes and thus (paradoxically) less ability to “control” one’s life in the long run. 

I encourage you to read these posts and all of Wade’s (exceptional) work.

Guarantees vs. Control

On the Pros and Cons of GLWBs

Safe Withdrawal Rates: Have I been barking up the wrong tree?

3 thoughts on “Guarantees v. Control

  1. Thank you very much Bob! And I likewise hope to encourage more people to read your blog.

    I meant for control to be in a relative, rather than absolute, sense. But you are certainly very right that the specter of capital losses limits one’s control with the free-wheeling unguaranteed approaches!

  2. “I meant for control to be in a relative, rather than absolute, sense.”

    If I was insufficiently clear, I am happy to clarify and agree that the control we are discussing is relative rather than absolute and that the scale is sliding. As I wrote above: “more control over one’s assets necessarily means being more susceptible to random — potentially negative and perhaps disproportionately negative (on account of statistical ‘fat tails’) — outcomes and thus (paradoxically) less ability to ‘control’ one’s life in the long run.”

  3. Pingback: Safe Retirement Income with TIPS and a deferred annuity

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