Advisor.ca - Daily News

Advisor.ca - Daily News: "Retirement boom fuels new investment strategies
June 08, 2006 Deanne Gage



As baby boomers begin to retire, look for more product innovations that combine investments with insurance and offer similar benefits to a defined benefit pension plan.
While that may describe the standard annuity or segregated fund, York University associate professor of finance Moshe Milevsky says those products are only the beginning.


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'These are products that are attempting to create systematic withdrawal plans that last for the rest of your life,' Milevesky told attendees of a Morningstar conference on retirement income planning on Wednesday.
Long-term care insurance merged with an annuity is an example of a product coming down the pipeline. So, if a policyholder has to go into a nursing home prematurely, the expense is covered. However, if the policyholder doesn't have to go to a nursing home and is healthy for the rest of her life, the policy will still pay out. Milevsky notes this product has already made headways in the U.S. 'It basically combines two risks that independently would be much expensive than when combined together.'
Another product development is what Milevsky calls advanced life longevity insurance, which only pays out if you exceed life expectancy. So if you purchase this policy in your forties, it won't pay out until you reach age 85. 'If you don't make it to age 85, you get nothing,' he says.
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