People nearing the end of their careers can potentially lose 5pc to 10pc of their retirement wealth, or the equivalent of two to five years’ labour, by failing to annuitise their savings or annuitising too early, according to an estimate by Alessandro Previtero of Ivey Business School in Canada. By providing a guaranteed income for life, an annuity is essentially an insurance policy against outliving one’s retirement savings. In a study, Previtero found that when stocks are rising, people are less likely to purchase annuities offered by their employers.

(Source: Journal of Financial Economics)

Published in Dawn, Economic & Business, August 25th, 2014