Retirement Income Showdown: Risk Premium vs. Risk Pooling

This presentation goes into greater depth about two retirement income tools: using an aggressive investment portfolio to seek greater returns through the risk premium, and using an income annuity with a partial annuitization strategy to seek greater returns through risk pooling. My research finds that risk pooling tends to be underappreciated as a unique source of returns that is unavailable for an investment portfolio in which the retiree aims to self-manage longevity and market risk through conservative spending. Risk pooling provides contractual guarantees for income, greater true liquidity, and the potential for a larger legacy over the long term.

(This presentation is based on an article published in the February 2017 issue of the Journal of Financial Planning)