The research, conducted by Moshe Milevsky, Associate Professor of Finance at York University and Executive Director of the Individual Finance and Insurance Decisions (IFID) Centre in Toronto, Canada, compared the value of guaranteed versus non-guaranteed annuities, a news release indicated. The research also quantified the value of having access to a variable income annuity, with downside protection, inside a defined contribution plan, according to the announcement.
In addition to advocating variable payout annuities (VPAs), the technical objective of the research is to examine the benefits and costs of having access to a downside-protected, or guaranteed, VPA. Milevsky pointed out that payout annuities provide consumers with “longevity insurance” by providing guaranteed income for life, the announcement said.
“We believe that defined contribution sponsors should give serious consideration to providing a diversified menu of asset classes and product classes to help participants prepare for a retirement in which they must generate lifetime income,” said Milevsky, in the news release. “In fact, our research supports the argument that variable payout annuities (VPAs) should form the backbone of one’s retirement income portfolio.”
The report is here .