A new strategy to guarantee retirement income using TIPS and longevity insurance
DOI:
https://doi.org/10.61190/fsr.v18i1.4934Keywords:
Financial ruin, Longevity, TIPS, Withdrawal rates, Retirement planningAbstract
Retirees investing their savings in stocks and bonds face the risk of financial ruin even when withdrawing as little as 4% annually. This paper proposes a new investment strategy using Treasury Inflation Protected Securities and longevity insurance that would guarantee real annual withdrawal rates in excess of 5% without any risk of financial ruin. The strategy can be implemented at minimal cost by retirees and their financial advisers. Institutional providers can use this strategy to offer products that would provide inflation adjusted lifetime incomes and allow retirees to retain control over most of their savings in retirement.
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