Faculty Publications

Title

Analyzing an Income Guarantee Rider in a Retirement Portfolio

Document Type

Article

Publication Date

Summer 2013

DOI

10.3905/jor.2013.1.1.100

Abstract

Income guarantee riders for variable annuities are growing in popularity as a retirement income tool. This article explores their role in both the deferral and withdrawal stages of retirement income planning. Results explore how well income guarantees support an inflation-adjusted benefit base, as well inflation-adjusted retirement income withdrawals. By comparing income provided by a guaranteed portfolio with an unguaranteed portfolio replicating the same payments, we can obtain greater insight about the efficacy of the income guarantee. Results depend on what asset allocation choices would be made by retirees both with and without the income guarantee.