Product Allocation for Retirement Income (PrARI)

Abstract

In the early years of an individual’s financial life, i.e., in the accumulation phase, savings and investments in a well-diversified portfolio are the focus. Participation in retirement benefit plans is encouraged, and as the individual gets closer to retirement and begins to contemplate withdrawals from the accumulated nest egg, a new set of risks such as longevity, inflation, and Sequence-of- Returns (SoR) risk begins to appear on the horizon and threaten the chances of financial retirement success. With a myriad of financial and insurance products available, knowing which of these products are suitable and in what proportions becomes very important. A product allocation strategy can help in successfully hedging these risks and minimizing their adverse effects.