Saturday, October 31, 2015

Actuaries Release Five New Issue Briefs on Retiree Lifetime Income

As a follow-up to their 2013 Public Policy Discussion Paper, “Risky Business—Living Longer Without Income for Life” (discussed in our post of June 20, 2013), the American Academy of Actuaries’ Lifetime Income Risk Joint Task Force recently released a flurry of Issue Briefs on Retiree Lifetime Income.  The five issue briefs are titled,
  1. Retiree Lifetime Income:  Choices and Considerations 
  2. Retiree Lifetime Income:  Product Comparisons
  3. Risky Business:  Living Longer Without Income for Life—Legislative and Regulatory Issues
  4. Risky Business:  Living Longer Without Income for Life—Actuarial Considerations for Financial Advisers, and
  5. Risky Business:  Living Longer Without Income for Life—Information for Current and Future Retirees
The Issue briefs can be found on the Task Force’s webpage.  There is a lot of good material contained in the issue briefs, and I encourage you to read some or all of them.  
The stated goal of the Academy’s Task Force is to educate the public, financial advisors, employers, the media, lawmakers and regulators on the risk of inadequate guaranteed lifetime income.  As may be expected from a group of actuaries with this goal, the issue briefs tend to stress the advantages of risk sharing (or risk pooling) arrangements (annuities and defined benefit pension benefits).  However, this most recent batch of issue briefs does not focus exclusively on the advantages of annuity products and the disadvantages of structured withdrawal programs.   They do acknowledge that there can be advantages of combining the two approaches.  For example the following guidance is contained in the Actuarial Considerations for Financial Advisers brief:

“A judicious use of pooling-based solutions, integrated with appropriate investment strategies, can often yield a more favorable financial result than one that fails to take pooling into appropriate consideration.”

I was also pleased to see that the Financial Advisers brief included the following recommended task, which is a common theme expressed in my website

“Assuring that recommended systematic withdrawal strategies meet client objectives and also appropriately reflect the existence or absence of pension benefits or insurance-based solutions that incorporate risk-pooling features.”

Sharp-eyed readers who go to the Task Force website may see my name included as a Task Force member.  Yes I did recently join this group, but for the most part, most of these Issue Briefs were drafted prior to my arrival.