Index
Numbers
401(k) plans, 4
investing in your own company, 207-209
A
Abaimova, Anna, 125
ALDA (Advanced Life Delayed Annuity), 181, 191
credit risk, 180
inflation, 180
protecting financial capital, 216
VA (variable annuities), 180-181
annuity riders, 181
asset allocation, diversification, 67-75
assets, financial listing of assets, 17-18
B
Becker, Professor Gary, 29
behavioral finance, 207
Benartzi, Shlomo, 207
borrowing, 101
bucket approach to retirement income, 128
C
capital market cost of GMDB (guaranteed minimum death benefit), 170
capital market guarantees, 170
careers, picking college majors, 213-208
college majors, importance of picking, 213-208
conducting needs analysis, 150-155
consumer price index (CPI), 104
correlation coefficients, 126
correlations, asset allocation, 67-75
cost
CPI (consumer price index), 104
inflation, 112
crash-proof investments, 94
credit card debt, 22
credit risk, annuities, 180
D
DB (defined benefit), 2
DB pension plan, 211
DC (defined contribution), 2, 211
death. See mortality
death benefit, 49
debt, 23, 85-86, 208. See also liabilities
credit card debt, 22
diversification, 23
houses, 87
housing bubble, 95
leverage. See leverage
debt-to-equity ratio, 87
decline of DB pension plan, 4-7
decomposing risk, diversification (systematic versus non-systematic risk), 59-62
defined benefit, 2
defined contribution. See DC (defined contribution)
debt, 23
decomposing risk, systematic versus non-systematic risk, 59-62
financial capital, 208
international investing, 62-64
space diversification, 74
Dual Uncertainty Model, 158-159
E
economic prosperity, life expectancy, 146-147
EDB (expected discounted bequest), 197
average income, 32
investing in, 30
versus mortality
females, 39
males, 39
net worth, 31
longevity insurance, 212
equity put option, 203
ETFs (exchange traded funds)
international diversification, 64-67
Vanguard, 67
F
Family, Inc., 16
financial listing of assets, 18
net worth, 24
nonfinancial assets, 19
fees, VA (variable annuities), 182-184
Feinberg, Judge Kenneth, 47
females, education versus mortality, 39
financial capital
diversification, 208
versus human capital, 32
inflation, 215
longevity, 215
market volatility, 215
protecting, annuities, 216
sequence of returns, 215
financial crisis
effect on assets, 18
retirement planning, 216
financial listing of assets, 17-18
financial risk, 78
FinSurance products, 181
Florida pension experiment, 9
Ford, 9
freezing of pensions, 8
G
GLiBs (guaranteed living income benefits), 192, 194-196, 203
GM (General Motors), 9
GMABs (Guaranteed Minimum Accumulation Benefits), 181
GMDB (guaranteed minimum death benefit), 166
capital market cost of, 169-170
GMIBs (Guaranteed Minimum Income Benefits), 181
GMWBs (Guaranteed Minimum Withdrawal Benefits), 181
Great Recession, 216
guaranteed living income benefits (GLiBs), 192
Guaranteed Minimum Accumulation Benefits (GMABs), 181
guaranteed minimum death benefit, 166
Guaranteed Minimum Income Benefits (GMIBs), 181
Guaranteed Minimum Withdrawal Benefits (GMWBs), 181
guarantees, product allocation, 200-203
H
hedging costs, 170
houses, 14
decline of, real-estate holdings, 19
housing bubble, 95
re-mortgaging, 89
housing bubble, 95
subprime borrowers, 96
versus financial capital, 32
life insurance. See life insurance
protecting, 214
I-J
income
average based on education, 32
longevity, 212
income approach, 45
income level, life expectancy, 143
income taxes in retirement, 154
inflation, 103-105, 112-113, 152
annuities, 180
CPI, 112
financial capital, 215
measuring, 106
pensions, 153
inflation adjusted-rates, 112
inflation rates, 107
inflation risk, product allocation, 189
insurance
life insurance. See life insurance
longevity insurance, 212
interest rates, leverage, 90
international investing
real estate, 63
investing in education, 30
investing in your own company, 401(k) plans, 207-209
K
Keynes, John Maynard, 55
L
left tail, 94
interest rates, 90
losing money, 92
chances of losing a quarter of initial investment, 93-90
making money, 90
money-back guarantees, 94
mortgages, 20
income level, 143
status, 143
U.S., 6
life insurance, 37-38, 43, 98, 200
death benefit, 49
human capital, 41
income approach, 45
temporary life insurance, 49-50
lifecycle hypothesis, 24
lifetime pay-out income annuities (LPIAs), 191
longevity
financial capital, 215
income, 212
mortality rates, 142
management strategy, 146
LPIAs (lifetime pay-out income annuities), 191-195
Lynch, Peter, 55
M
males, education versus mortality, 39
market volatility, financial capital, 215
measuring inflation, 106
median net worth, 24
medical costs, elderly, 108
money-back guarantees, leverage, 94
Monte Carlo simulation method, 159-163
chances of dying during the next ten years, 40
versus education
females, 39
males, 39
mortality and expense (M&E) fee, 167
mortality rates, 142
mortgages, 20
N-O
NASCAR, 61
Needs-to-Wealth (NtW), 155
net worth
education, 31
Family, Inc., 24
human capital, 26
median net worth, 24
nonfinancial assets, 19
non-systemic risks, versus systemic risks, 59-62
P-Q
payment certain (PC), 175
pay-out stage, 166
PC (payment certain), 175
pensions, 211
DB pension plan
Florida pension experiment, 9
freezing of, 8
inflation, 153
permanent coverage, life insurance, 50-53
personal balance sheets, protecting, 212-216
personal use assets, 19
personal worth
debt, 23
financial listing of assets, 17-18
nonfinancial assets, 19
PrARI, 197
probability distribution, 38
probability of financial regret, 76
product allocation, 188, 198-199, 203-204
inflation risk, 189
life insurance, 200
sustainability, 199
VA (variable annuities), 191
protecting
financial capital, annuities, 216
human capital, 214
personal balance sheets, 212-216
R
real estate, international investing, 63
real-estate holdings, decline of, 19
remortgaging houses, 89
replicating costs, 170
retirees. See also elderly
number of U.S. retirees per 100 workers, 6-7
statistical perspectives of retirement income, 125-127
retirement grade point average, 192
retirement income
Dual Uncertainty Model, 158-159
risk factors, 126
trigonometry, sequence of returns, 118-124
retirement planning, financial crisis, 216
retirement ruin, 215
return variability, 127
return-of-premium (RoP), 167
risk
decomposing risk, systematic versus non-systematic risk, 59-62
longevity risk, 127
time, impact on risk and volatility, 75-78
risk factors, retirement income sustainability, 126
RoP (return-of-premium), 167, 169
RSQ (retirement sustainability quotient), 204
S
financial capital, 215
retirement income trigonometry, 118-124
statistical perspectives, 124-127
shareholders
freezing of pensions, 8
You Inc., 15
single premium immediate annuities (SPIA), 174
space diversification, 74
spending habits, inflation, 109-110
SPIA (single premium immediate annuities), 174
subprime borrowers, housing bubble, 96
sustainability, product allocation, 199
SWiP (systematic withdrawal plan), 129, 190, 193, 195
systemic risks versus non-systemic risks, 59-62
T
temporary life insurance, 49-50
Thaler, Richard, 207
time, impact on risk and volatility, 75-78
Tonti, Lorenzo, 176
U
universal life insurance, 50-53
U.S., number of U.S. retirees per 100 workers, 6-7
V
VA (variable annuities), 166, 168, 180-181
product allocation, 191
Vanguard, ETFs, 67
variable annuities. See VA (variable annuities)
volatility, impact of time, 75-78
W-X
Y-Z
York University in Toronto, 209
shareholders, 15