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Retirement Income Showdown: RISK POOLING vs RISK PREMIUM

WADE PFAU
October 28, 2016

The retirement income showdown regards finding the most efficient approach for meeting retirement spending goals: obtaining mortality credits through risk pooling with an income annuity, or investing for upside growth through the stock risk premium. Analyzing the question involves understanding how clients view a hierarchy of retirement goals related to spending, liquidity and legacy. Client attitudes toward longevity risk aversion also matter: how fearful is the client of outliving their investment portfolio and does this jeopardize the client’s ability to fully enjoy their retirement?

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