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Personal Finance

Pros and Cons of Guaranteed Income Streams

Controlling longevity risk is achievable, but investors have to decide what they're willing to give up to get it.

To manage longevity risk, investors and advisors must weigh an incredible number of factors, including, ultimately, one that is unknowable: how long a person is going to live. Meanwhile, the financial industry, has been rolling out more and more products and innovations that offer new ways to guarantee investors a steady stream of retirement income. But sorting through and understanding all these options has become its own challenge.

In the fall of 2010, I sat down with three leading experts in the field to get a handle on longevity risk and the best ways to control it. Moshe Milevsky is a finance professor at the Schulich School of Business at York University in Toronto and author of Are You a Stock or a Bond? Create Your Own Pension Plan for a Secure Financial Future (FT Press, 2008). John Ameriks is a leading researcher at Vanguard, where he heads the firm's Investment Counseling & Research group. Thomas Idzorek is chief investment officer and director of research at Ibbotson Associates.