A new strategy to guarantee retirement income using TIPS and longevity insurance: A second look

Authors

  • Paul Haensly College of Business and Engineering, The University of Texas of the Permian Basin
  • K. Prakash Pai College of Business and Engineering, The University of Texas of the Permian Basin

DOI:

https://doi.org/10.61190/fsr.v24i4.3244

Keywords:

Retirement planning, Withdrawal rates, TIPS, Longevity risk, Financial ruin

Abstract

Shankar (2009) proposes a new investment strategy for retirees that bundles Treasury Inflation Protected Securities with a deferred annuity to guarantee real annual withdrawal rates of 5% or more with no risk of financial ruin. This strategy addresses three problems that retirees face: longevity risk, inflation risk, and liquidity risk inherent in the purchase of an immediate annuity. In our article, we evaluate the performance of this proposed strategy under realistic assumptions about costs, security design, and markets. In addition, we evaluate how the bequest motive might affect the choice between Shankar’s strategy and an immediate annuity.

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Published

2015-12-30

How to Cite

Haensly, P., & Pai, K. P. (2015). A new strategy to guarantee retirement income using TIPS and longevity insurance: A second look. Financial Services Review, 24(4), 359–386. https://doi.org/10.61190/fsr.v24i4.3244

Issue

Vol. 24 No. 4 (2015): Winter 2015

Section

New Original Submission

License

Copyright (c) 2014 Academy of Financial Services

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