Women should put 40% to 80% of retirement assets into lifetime income annuities, according to Lifetime Income for Women: A Financial Economist’s Perspective, a paper by David Babbel, professor of insurance and finance at the Wharton School of the University of Pennsylvania. (New York Life Insurance Company funded some of the author’s research.)
Babbel points out three popular retirement income approaches–annuitization of one’s wealth; an investment in primarily fixed-income instruments; and an investment primarily in stocks, bonds, and mutual funds. The study argues that annuitization provides for greater control of wealth. The right combination of annuities enables women to: finance additional investments with remaining funds; create an emergency fund; or gift with little impact on their financial security. Babbel also stresses that the market for lifetime income annuities has become very competitive, leading to new product features and better pricing.