Nobel Prize-Winning Economist Bill Sharpe is Looking for a Better Retirement Income Solution
Michael Finke of the American College interviews Nobel Prize winning economist Bill Sharpe (he of ‘Sharpe ratio’ fame) about his latest research in ThinkAdvisor. “Finding a Better Retirement Income Solution” examines the results of his analysis demonstrating the strength of annuities as retirement income solutions.
Finke says Sharpe, like most economists, is positive about the efficiency of income annuities. He writes, “If you want to minimize the ‘waste’ of unspent retirement funds while protecting against risk of running out of income, annuities are the best option.”
Maximizing retirement income is another way to minimize potential waste. Variable Annuities with guaranteed lifetime withdrawal benefits (GLWBs) available on the RetireOne fiduciary platform offer even better benefit rates than those used in the Sharpe analysis.
Among his primary aims, Sharpe is concerned about achieving balance of lifestyle and risk. Like us, he favors the idea of establishing an income floor and investing the rest in equities. The RetireOne approach would be to split retirement savings between a VA with a GLWB to cover longevity and lifestyle goals, and bulking up to 80/20 equity/fixed income for the remainder liquidity and legacy goals (to borrow the retirement planning lingo of Wade Pfau).
For more details on Bill Sharpe’s work, see Chapter 19 of his book “Retirement Income Analysis with Scenario Matrices”