1. ISSUES IN THE PAYOUT PHASE
Gary Hendricks Regional Pension Workshop Majuro, Republic of th Marshall Islands April 25-29, 2016

2. Issues in Payout Phase (DC): Payout Options
Lump sum distribution at retirement
Periodic payout for fixed term
Guaranteed life annuity

3. Payout Options: Lumpsums
Withdraw entire account balance upon retirement
De minimus accounts
Risk aversion
Invest in alternative form of retirement security
Withdraw part of balance
Reduce cost of living (debt reduction)
Moderate risk
Remaining balance available for other options
Disadvantages of withdrawals
May lose ability to smooth income over lifetime
Exposes worker and family to poverty in future

4. Payout Options: Payments over Fixed Term
Option: Worker select to receive monthly payments over a fixed period (5,10, 20 years) after which funds will be exhausted.
Advantage: Higher monthly pension than under annuity
Disadvantage: May exhaust savings too soon

5. Payout Options: Life Annuities
Major advantage: Pension is guaranteed for life
Disadvantage:
Pension ceases when worker dies
Adequacy can be compromised if there are survivors
Adding survivors is expensive and reduces worker’s pension

6. Annuity Options Single life annuity Joint and survivor annuity
Fixed term annuity with guaranteed benefit thereafter

7. Single Life & Period Certain Annuities (Immediate Income on $100,000 for Age 65 Male)
Option
Estimated Monthly Income
Annual Cashflow rate
Single Life Only 
$549
6.59%
Single Life with 5 Years Certain 
$551
6.61%
Single Life with 20 Years Certain 
$495
5.93%
5 Year Period Certain 
$1,719
20.63%
10 Year Period Certain 
$917
11.01%
15 Year Period Certain 
$666
7.99%
20 Year Period Certain 
$546
6.55%
25 Year Period Certain 
$488
5.85%

8. Joint Life & Period Certain Annuities (Immediate Income on $100,000 for Male Age 65 with Female Age 50 )
Option
Estimated Monthly Income
Annual Cashflow Rate
Joint Life Only 
$388
4.65%
Joint Life with 5 Years Certain 
Joint Life with 10 Years Certain 
$387
4.64%
Joint Life with 15 Years Certain 
$384
4.61%
Joint Life with 20 Years Certain 
$381
4.57%