White Paper: Unbundling Investments from Insurance to Solve for Lifetime Sequence-of-Return Risk

Wade Pfau explores how CDA may help solve for sequence-of-return risk

Pfau headshotIn a new White Paper entitled, “Unbundling Investments from Insurance to Solve for Lifetime Sequence-of-Return Risk,” American College of Financial Services Professor Wade Pfau, PhD, explores the unique problem presented by sequence-of-returns risk on a retiree’s “fragile decade” – the five years before and first five years in retirement – and how a Contingent Deferred Annuity (“CDA”) may help solve it.

CDAs unbundle the insurance protections from the underlying investments so advisors may wrap ETFs and mutual funds in client IRAs, Roth IRAs and brokerage accounts.

According to Dr. Pfau, retirees can “manage sequence risk by pooling their market risk and longevity risk through a contingent deferred annuity that provides the traditional risk pooling benefits of an annuity with a much smaller ‘annuity footprint,’ helping to overcome many of the traditional obstacles to annuity use.”

Download the white paper to learn how, rather than avoiding risk in the years around retirement, advisors can wrap the risk with insurance that will provide lifetime income for folks who encounter a poor sequence of returns.