It’s been a busy week here at the office, but it’s exciting to see things like the latest EBRI report confirming the importance and value of qualifying longevity annuity contracts (QLACs) to the general public.
How Much Can Qualifying Longevity Annuity Contracts Improve Retirement Security?
The Employee Benefit Research Institute (EBRI) came out with a report in late August that will certainly boost interest in QLACs.
When EBRI studies a retirement area, you can be assured that it’s both objective and well-considered. While we may use our own set of analytics and use QLACs in more diverse ways than they recommend, we agree that it can improve a retiree’s “readiness” as well as their peace of mind.
The adoption of QLACs in 401(k) and IRA plans will encourage use of income annuities generally, which is most definitely a good thing for investors.
The Misplaced Faith in Optimizing Portfolios
Guaranteed income is the surest way available to deal with the three great threats to retirement income security: longevity risk, sequence risk and “stupidity risk,” as this article puts it.
While a little technical and published primarily for advisors, there is still a lot that the average investor can learn.
First, advisors who are expert in either investments or in annuities, but not in both, can’t bring you the best retirement answers. Further, without an understanding of the tax attributes of certain savings vehicles, advisors can’t optimize after-tax income.
Second, as the inventor of the first living benefit guarantee, I can report that current designs may in fact provide less upside and more complexity. The simple annuity and the simple diversified growth portfolio may be the best approach, when used in a smart, integrated way.