Retirement Income ― Risks and Strategies

As members of the baby boom generation head into retirement, they face an economicenvironment that has changed noticeably since their parents retired. Most of these new retirees willnot be equipped, as many in the earlier generation were, with private pension plans, earlyretirement options, and fully paid retiree health benefits in addition to Social Security andMedicare. Today it is increasingly left to retirees themselves to plan how to maximize retirementincome and minimize risk. In Retirement Income, Mark Warshawsky and hiscolleagues describe strategies, products, and public policies that will help a new generationachieve financial security and income growth in retirement.

Warshawsky, a notedexpert in the field who has worked in both government and private industry, analyzes two insurancevehicles, life annuities and long-term care insurance, and their capacity to protect against theextra costs arising from longevity and disability. He proposes two innovations. The first is astrategy that includes a set percentage withdrawal from a balanced portfolio, which is graduallyused to purchase a ladder of life annuities. The second proposal, which includes a description ofthe potential choices in product design and available tax characteristics, is a product thatintegrates the immediate life annuity and long-term care insurance.

WithRetirement Income, Warshawsky offers practical ideas based on the results ofempirical investigations and analyses, which can be applied to household decision making by retireesand their financial planners and to the design of insurance products and public policy.

Mark J. Warshawsky is Director of Retirement Research at Towers Watson, former member of the Social Security Advisory Board, and coauthor of The Role of Annuity Markets in Financing Retirement (MIT Press).