Lonsec   ⟩   Articles   ⟩   Lonsec Retirement Perspectives   ⟩   The Role of Annuities in Retirement Portfolios

AuthorCasey Brown

DateMarch 11, 2018

CategoryLonsec Retirement Perspectives

Share

In recognition of the growing challenges facing retirees, Lonsec has published a paper on the role annuities can play in retirement portfolios. The paper explores some of the common issues facing retirees such as sequencing risk, longevity risk and market risk.

The main benefits and risks of annuities are considered as well as how annuities can mitigate these risks. The paper examines how annuities can work with the age pension and other investment products to help retirees meet essential spending objectives as well as provide for discretionary spending.

Lonsec believes that annuities are an attractive proposition for retirees looking to secure part of their retirement income stream, including in conjunction with the age pension, to boost the amount of guaranteed income during retirement. Additionally, Lonsec notes that there is a mass market of retirees for whom annuities may be appropriate, typically those with retirement savings of between $250,000 to $1,500,000.

Lonsec does not have a preferred means to best make an allocation to annuities within a diversified investment portfolio but notes there are two commonly held schools of thought. The first is to allocate from the defensive assets within a portfolio and the second is to ‘carve-out’ a separate allocation for the annuity and retain the existing asset class weightings over a smaller asset base.

For more information contact:

Gordon Toy
03 9623 6373
Gordon.Toy@lonsec.com.au

Related stories

11 Mar 2019 - “How much can I spend?” This question lies at the heart of so many conversations between a retiree and their adviser. Although not explicitly stated, this ...

Craving Certainty – The Retirement Mirage

By Lonsec Retire Read now