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Retirement Insights

How variable annuities can increase income

Variable annuities (VAs) with Guaranteed Lifetime Withdrawal Benefits (GLWBs) potentially offer a higher expected income and lower risk. They can provide stable income, reduce market risk, and be efficient in capital use, requiring less investment for retirement income.

  • 01

    Higher income, less volatility

    VA and GLWBs can generate a higher expected income net of fees than systematic withdrawals without insurance. They’re designed to provide a stable floor for future income, even during adverse market conditions.

  • 02

    Effective hedge against longevity risk

    VAs can provide income in the form of guaranteed stable payments and protect income for longer life expectancies.

  • 03

    Greater capital efficiency

    The consistent income VAs with GLWBs can offer make them a favorable option for individuals seeking stable income to cover essential expenses in retirement, offering greater capital efficiency compared to other investment strategies such as bond ladders.

Navigating the new retirement landscape

Creating sustainable retirement income is more complex than ever. Today’s financial landscape is volatile, pensions are much rarer, and longevity has increased significantly.  Employers once shouldered the responsibility of helping their employees secure guaranteed retirement income. Now, it largely falls on individuals and their advisors. BlackRock’s research provides valuable insights into navigating this new reality.

Maximizing retirement with smart decumulation

Retirement planning transcends merely enhancing savings and maximizing returns. It’s about making informed decisions on how to convert those savings into a steady stream of income. Our goal, backed by VA Research, is to help balance income optimization with consistent consumption over time, helping to ensure that investors don’t outlive their savings.

Embracing our vision to redefine retirement, the BlackRock Retirement Insurance Team, in collaboration with BlackRock’s Retirement Solutions Team, has analyzed the role of annuities in improving retirement outcomes. Our research indicates that integrating variable annuities (VAs) into the retirement strategies you develop for clients can not only provide more predictable income but may also instill greater confidence in their financial futures.

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Integrating variable annuities (VAs) into the retirement strategies you develop for clients can not only provide more predictable income but may also instill greater confidence in their financial futures.

Maximizing retirement resilience with variable annuities

Our findings, supported by VA Research, suggest that an allocation to variable annuities can effectively manage income variability and act as a safeguard against outliving savings. In certain scenarios, this strategy can generate a higher income compared to a traditional portfolio mix of 60% stocks and 40% bonds, leading to a more substantial cumulative income. Moreover, it enhances capital efficiency, offering further benefits in elevating client outcomes.

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