Lifetime Expected Income Breakeven Comparison between SPIAs and Managed Portfolios
This paper provides a comparison of total expected lifetime cash flows between single premium immediate annuities (SPIAs) and managed portfolios. This analysis shows that assets should be retained and managed in the markets longer than conventional wisdom suggests before the purchase of a SPIA. Key factors that encourage annuitization include being older, having greater longevity relative to peers, aversion to holding equities, and higher portfolio fees. The paper concludes with a step-by-step procedure to perform calculations that inform advisers and their clients of the breakeven between SPIAs and managed portfolios using current data.
Pfau, Wade, "Lifetime Expected Income Breakeven Comparison between SPIAs and Managed Portfolios" (2014). Faculty Publications. 187.