Life insurance and financial service professionals agree on some basic guiding tenants for building a retirement nest egg. These include investing in a well-diversified equity and fixed income portfolio; buying protection products to guard against the unexpected; and maintaining a sizeable emergency fund to cover immediate cash needs in a financial emergency.
Yet there remain significant differences of opinion among advisors about the best way to prepare for the other side of the accumulation divide: a retirement income plan. Some advisors favor the risks and rewards inherent in an equity portfolio; others prefer the contractual guarantees of insurance products.
A new white paper from OneAmerica opines that neither investments alone nor insurance alone is sufficient. Both are needed to best serve retirees' needs, taking into account the financial risks and concerns of retirees.
Among them:
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Whether a retired couple can maintain a lifestyle to which they are accustomed.
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How long will they live, and whether they have sufficient income until the death of the survivor.
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Whether they will have sufficient liquidity for unexpected contingencies;
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Whether they'll be able leave a legacy for subsequent generations; and
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How best to mitigate risks connected with investment volatility, inflation, unforeseen spending needs and cognitive decline.
A white paper from OneAmerica, "Optimizing retirement income by combining actuarial science and investments," addresses these issues by comparing three retirement plan scenarios:
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investments and term life insurance;
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investments, joint and 100 percent survivor annuity and term life insurance; and,
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investments, single life annuity and whole life insurance.
OneAmerica's analysis concludes that combining the three vehicles — investments, single life annuities and whole life insurance — produce a superior income level and legacy than when implementing investment-only solutions.
"By strategically combining all three of these elements, the potential exists to develop more efficient retirement income strategies," the report states.
