Description: The "feel free" strategy helps retirees understand when they can retire, how much they can spend and how much guaranteed income they might want. The approach is very simple - divide your age by 20 and feel free to spend that percentage of your savings in a year.

Description: The asset portfolios of retirees’ serve many purposes including current income, liquidity, purchasing power, estate, tax minimization, and so on. Multiple objectives with different levels of importance lead to a complex asset allocation problem for retirees. Existing asset allocation methods normally focus on a subset of the multiple objectives of retirees in an approximate way. The simulation-based multiple objective asset allocation method objectively assesses each allocation plan against multiple objectives in a consistent way and provides a more holistic picture of possible outcomes. This information is critical for finding the optimal allocation plan. The optimization is based on the weighted performance relative to multiple objectives. At the same time, it requires more inputs and advanced modeling.

Description: This article sheds light on the various ways machine learning can uncover patterns within data to add unique value and insights to businesses.

Description: Short descriptions of the various articles in the June issue.

Description: In a world where pensions for new hires are predominantly provided with defined contribution plans, defined benefit plans have moved in many cases from being a strategic human resource management tool to being a source of volatile historic liabilities and costs that need to be managed downward. While the approaches for dealing with these liabilities broadly consist of risk transfer, settlement or funding, the precise options available will vary by country depending on the local pension framework and legal requirements. Any company with material global pension liabilities would be well advised to monitor these closely, in order to be able to take advantage of opportunities to de-risk, and to ensure that a global pension de-risking budget is allocated to the activities which are expected to yield the best returns for the group.

Description: Demographic changes around the world may present actuaries with an opportunity to tackle product development, risk management and asset allocation challenges involving financial and investment variables.

Description: Abstract: Interest rate changes and volatile equity returns have contributed to significant funding and expense volatility for defined benefit plans in recent years. This paper will describe the design of an option contract with payouts that are tied to the combined impact of interest rates and investment returns on the funding level of a defined benefit pension plan. Current derivatives used by plan sponsors can limit exposure to one of these risks; however, a derivative that combines these risks may provide more targeted protection to a plan sponsor at lower cost. This paper discusses several considerations in designing such a derivative. It will also briefly discuss pricing of the option. Finally, the difference in potential outcomes between plan funding with and without option ownership will be demonstrated. As an outcome of the design work, a new way to visualize pension risk that may be useful in sponsor accounting disclosures will be shown.

Description: In a very general setting this paper describes a straightforward, non-parametric approach to aggregate "stand-alone" or marginal distributions with desired correlations without imposing additional assumptions on those marginals. We then develop two optimizations for the enterprise, one based on maximizing return on economic capital and the other based on a mean -semivariance efficient frontier from the investor point of view.

Description: We employ a framework for the classification of mortality evolution patterns to HMD data. We find both supra-regional patterns and outliers from global trends.

Description: In this paper, we derive three important longevity Greeks on the basis of an extended version of the Lee-Carter model that incorporates stochastic volatility.