Insight: New Takes on the Annuity Puzzle: The Importance of Framing Longevity With Clients

By Travis L. Johnson, PhD

Insight Overview


Retirement investors can combine traditional investments in stocks and bonds with a position in annuities to achieve the best of both worlds: longevity insurance from annuities and upside, emergency withdrawals, bequests, and personalized payout paths from traditional investments. These combination portfolios can be implemented in numerous ways, such as offering annuity options in defined-contribution (DC) plan selections, mixing DC plans with defined-benefit plans for very late in life (e.g., age 85 and older), or expanding the social security program.

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About the Author

TRAVIS L. JOHNSON, PhD is an Associate Professor of Finance in the McCombs School of Business at the University of Texas at Austin. He earned a Bachelor of Science in Mathematics from the Massachusetts Institute of Technology and a PhD in Finance from the Stanford Graduate School of Business. He has published numerous articles in the top peer-reviewed journals for finance, accounting, and management. He also teaches quantitative investments to undergraduate and graduate students at McCombs, and is an associate editor at the Journal of Financial and Quantitative Analysis.

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