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White Papers

Rethinking Longevity Risk: A Framework to Address the Tail End

With the significant improvement of human lifespan, traditional retirement thinking does not adequately take into account the need to provide for the tail end of the lifespan in the form of a stable stream of retirement income. Retirement readiness is closely tied to the three critical aspects of retirement: funding, investment returns, and withdrawal of one's retirement assets. In retirement assets, we look to maximize their values; in retirement income, we look for a stable stream of income. These two objectives are not one and the same. A two-prong investing and funding framework is discussed in this paper, based on the recognition that the human lifespan in retirement can be best viewed as consisting of a definable normal period and an undefinable tail period. For the normal period, we can borrow from the available toolset in wealth management on accumulation and decumulation of wealth; for the tail period, we may consider deferred income annuity.

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