The Right Hedge for Retirement

res1114coverMy November column for Research magazine came in the mail today with the rest of a typically fine publication and went live on-line too. Here’s a taste.

The great fear of every retiree is running out of money. Guaranteed income via Social Security, defined benefit plan and annuity contract is by far the safest means to provide retirement income that one can’t outlive. Therefore, prospective retirees with insufficient Social Security and pension income would do well to consider the benefits of hedging their retirement investment risks via annuity contract.

One can readily and reasonably argue about how much guaranteed income a retiree ought to have, the extent of inflation protection that’s necessary and appropriate, how much one should pay for such protection, and how to balance the costs and tradeoffs (particularly relating to control and legacy) that annuities require. These issues require careful analysis and thoughtful consideration by prospective retirees, their families and their advisors.

But one cannot reasonably argue that annuities don’t do precisely what they are designed to do. They provide guaranteed retirement income that one cannot outlive. A retiree with more guaranteed income has less risk of financial disaster than one with less guaranteed income. Economists routinely sing the praises of annuities as does the federal government’s General Accountability Office. Guaranteed income offers retirees the great retirement hedge. Annuities do what they are supposed to do.

I hope you will read the full article as well as the entire magazine.

The Right Hedge for Retirement

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