Variable Annuities and the New Retirement Realities&ast

Christopher M Condron ()
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Christopher M Condron: AXA Financial, 1290 Avenue of the Americas, NY, NY 10104, USA.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2008, vol. 33, issue 1, pages 12-32

Abstract: People today face the prospect of a retirement that may likely last 25 years or even longer. Concerns about the stock markets' volatility and the potential impact on their portfolios has caused many individuals approaching retirement to retreat from investments in equities and shift into fixed-income assets, despite historical evidence that investment in equities provide long-term returns superior to fixed-income returns. This conservative approach, embodied in such tools as Target Date Funds, for some investors could hamper asset accumulation and may make it less likely that assets will remain adequate to provide sustained sources of income during a lengthy retirement period. The insurance industry is uniquely positioned to offer those nearing retirement an alternative investment and risk management strategy through variable annuities. Features in the newer variable annuity product designs encourage individuals to remain invested in equities at older ages by cushioning them from some of the consequences of market volatility. As a result, investors are more apt to maintain a more equity-weighted investment portfolio and thereby have an opportunity to realize a greater portion of the superior growth potential that equities have historically provided over the long term. The Geneva Papers (2008) 33, 12–32. doi:10.1057/palgrave.gpp.2510165

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