The Handbook of Variable Income Annuities
With trillions of dollars in retirement savings assets, the tens of millions of Americans on the precipice of retirement need to convert these savings into retirement income. The fact that variable income annuities (VIAs) generate maximum lifetime income with zero probability of outliving it has spurred the need for more information about VIAs. The Handbook of Variable Income Annuities is by far the most comprehensive source of information on this topic. This book thoroughly describes the most important principles of optimal asset liquidation and demystifies VIA mechanics, so readers can gain a high comfort level with this important financial instrument. Interestingly and clearly, The Handbook of Variable Income Annuities explains the mathematical pricing of variable income annuities, expected rates of return, taxation, product distribution, legal aspects, and much more.
Jeffrey K. Dellinger (Fort Wayne, IN), a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries, has over 25 years experience in the financial services sector. He advises institutions on retirement income optimization, products, and markets.
Chapter 1: Retirement Income Basics.
The Game Revisited.
Fixed Annuities Revisited.
Shortcoming of Simplified Retirement Income Projections.
Shortcomings of Traditional Retirement Income Approach.
Retirement Income Basics Summary.
Chapter 2: Annuity Categorization.
Deferred versus Immediate Annuities.
Life-Contingent versus Non-Life-Contingent Annuities.
Tax-Qualified versus Non-Tax-Qualified Annuities.
Chapter 3: Immediate Fixed Annuity Mechanics (Non-Life-Contingent).
Fixed Annuity Payout.
Immediate Fixed Annuity Asset-Liability Management.
Chapter 4: Immediate Variable Annuity Mechanics (Non-Life-Contingent).
Varying the AIR.
Volatility of Variable Annuity Income.
Immediate Variable Annuity versus Systematic Withdrawals.
Reverse Dollar Cost Averaging.
Owner Control after IVA Purchase.
Chapter 5: Annuity Payout Options.
Considerations in Selecting an Annuity Option.
Immediate Variable Annuity Prospects.
Value Equivalence of Annuity Options.
Chapter 6: Annuitant Populations and Annuity Present Values.
Categorization and Characteristics.
Annuity Mathematics (Life-Contingent).
Annuity Mathematics (Non-Life-Contingent).
Annuity Mathematics II (Life-Contingent).
Alternate Derivation of Approximation Formula for Present Value of Annuities Payable More Frequently than Annually.
Continuous Life-Contingent Annuities.
Varying Life-Contingent Annuities .
The Aging Process.
Aging Theories, Biomarkers, and Telomeres.
Force of Mortality.
Mortality Table Construction.
Considerations in Mortality Table Selection.
Formula-Based Mortality Tables.
Law of Large Numbers.
Age Distribution Histograms.
Mortality Table as Survivorship Model.
Last Survivor Annuities.
Last-Survivor Annuity with Pop-Up Provision.
Increasingly Important Concept in Tough Economic Times.
Chapter 7: Immediate Variable Annuity Subaccounts.
Overview of Subaccounts.
Typology of Variable Annuity Subaccounts.
Number of Subaccounts and Considerations in Subaccount Selection.
Modern Portfolio Theory.
Capital Asset Pricing Theory.
Total Market Risk versus Security-Specific Risk.
Academic Research and Its Practical Implications for Retirement Income.
Chapter 8: Rate of Return.
Early Deaths and Late Deaths.
Rate of Return Example Using Realistic Mortality Rates.
Annuity Present Value Distributions.
Annuity Present Value Appraisals.
Benefit of Investment versus Benefit of Survivorship.
Rate of Return Methodologies.
Rate of Return and Inflation.
Rate of Return and Taxes.
Chapter 9: Reserves and Risk-Based Capital.
Reserve Laws and Guidelines.
Immediate Variable Annuity Reserve Calculations.
Reserve Effect Introduced by Offering Multiple Subaccounts.
Use of Statutory Immediate Variable Annuity Reserves in Product Design.
Substandard Annuity Reserves.
Insurance Company Absorbs Risks.
Risk Measures Aid in Capital Requirements.
Risk Measures and Economic Capital.
Chapter 10: Immediate Variable Annuity Taxation.
Immediate Variable Annuity Income Taxation.
Use of Immediate Annuities to Avoid 10% Penalty Tax on Premature Distributions.
Chapter 11: Services and Fees.
Product Fees and Charges.
Insurer Perspective: Variable Income Annuity Expenses.
Chapter 12: Product Distribution.
IVA Pricing Optimization Process.
Sample IVA Wholesaling Story.
Looking to the Future.
Comparison Indexes and Disclosure.
Chapter 13: Individual Immediate Variable Annuity Underwriting.
Standard Life Underwriting.
Substandard Life Underwriting.
Chapter 14: Legal Issues.
Separate Account Insulation.
Variable Annuity Contract.
IVA Contract Provisions.
IVA Contract Administration.
Status of Immediate Annuities in Creditor Attachment and Assistance Program Qualification.
Chapter 15: Securities Law.
Federal Securities Law.
State Securities Law.
Organizational Structures of Variable Annuity Issuers.
Chapter 16: Forms of Insurance and Insurers.
Insurance versus Gambling.
Private Insurance versus Social Insurance.
Defined Benefit Pension Plans.
Types of Insurance Organizations.
IVA Company Organizational Structure.
Chapter 17: IVA Business Value to Annuity Company.
Interplay of Pricing, Reserving, and Risk-Based Capital.
Immediate Annuity Value Creation.
Chapter 18: Product Development Trends.
Payout Floor Guarantees.
An Introductory Lesson on Options.
Other Product Development Possibilities.
Comments on Product Variations.
Stochastic Modeling of Mortality.
Life Annuity Mortality Risk Securitization.
Annuity Writers’ Strategic Bases of Competition.
Chapter 19: Conclusion.
Quotable Wisdom Regarding Longevity.
About the Author.
Index to Notation.