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New York Life Receives Industry Thought Leadership Award

New York Life’s Efficient Income Frontier Work Receives Retirement Income Industry Association’s 2012 Practitioner Thought Leadership Award

NEW YORK, N.Y., April 11, 2012 — New York Life today announced that it received the Retirement Income Industry Association’s 2012 Practitioner Thought Leadership Award.

Dylan Huang, corporate vice president; Matthew Grove, vice president; and Todd Taylor, actuarial director, received this honor for their work, “The Efficient Income Frontier: A Product Allocation Framework for Retirement.” They were presented the award at the RIIA Spring Conference in Chicago on March 19.

The work explains the need for a different approach to evaluating risk and return when an individual’s portfolio transitions from accumulating assets to using them to provide retirement income. In retirement, individuals shift from a traditional evaluation of risk and return to outcome-based measures: Income Risk, the risk of running out of money in retirement; Legacy Potential, the assets available to transfer to heirs; and the level of safe inflation-adjusted retirement spending. The paper establishes the rationale for this new approach and then builds a case for a new type of efficient frontier, the Efficient Income Frontier, as a method for determining the optimal mix of asset classes in retirement.

One of the major findings of this paper is that income annuities can substantially reduce the risk of running out of money in retirement and can in fact improve overall portfolio performance over time. Portfolios that incorporate income annuities feature:

  • Reduced Income Risk – because income annuities generate guaranteed lifetime income regardless of how long the investor lives.
  • Greater capacity to bear risk in the rest of a portfolio – because income annuities are not correlated with market swings, they exert a powerful smoothing effect on overall performance and enable greater equity holdings
  • Reduced withdrawal pressure – because income annuities offer higher cash flows than other fixed income instruments of similar credit quality, they can lead to a higher Legacy Potential in the future.

In addition to outlining these findings, the paper also presents a detailed case study showing how an individual with a specific portfolio experiences the benefits of reduced income risk, higher legacy potential, and reduced withdrawal pressure by supplementing a traditional portfolio with income annuities. The hypothetical case study provides context that shows the real world applications of this framework.

In addition to outlining these findings, the paper also presents a detailed case study showing how an individual with a specific portfolio experiences the benefits of reduced income risk, higher legacy potential, and reduced withdrawal pressure by supplementing a traditional portfolio with income annuities. The hypothetical case study provides context that shows the real world applications of this framework.

Over the past year, New York Life has begun to put the research summarized in this paper into action.

“The Efficient Income Frontier has become an important part of our efforts to educate advisors about the need for retirement income planning and the benefits of income annuities in retirement income portfolios,” said Matt Grove, one of the paper’s authors. “We have worked closely with many of our distribution partners to share our findings and the implications for retiree portfolio construction. Our Advanced Income Solutions team also uses this methodology to provide custom portfolio recommendations for advisors to use with their clients.”

A second Thought Leadership Award was given to Sherrie Grabot, CEO of GuidedChoice and Harry Markowitz, Ph. D., Chief Architect of Investment Solutions for GuidedChoice and professor of finance at the Rady School of Management at the University of California, San Diego, who were recognized for their paper: “Financial Guidance Theory.”

In addition to receiving this unique award, the paper is in the Spring 2012 issue of the Retirement Management Journal(RMJ).

Thought Leadership Awards

Sponsored by Allianz Global Investors, the RIIA Thought Leadership Awards program consists of two categories, thePractitioner Thought Leadership Award and the Academic Thought Leadership Award where practitioners and scholars are recognized for their papers demonstrating excellence in original thinking and industry leadership on retirement management topics that contribute to RIIA’s Body of Knowledge, the Retirement Management Analyst designation curriculum, and retirement-income planning and management knowledge in general. Practitioner authors may range from financial advisors to product development managers to marketing communications experts. Scholars may include academics from across the realm of educational institutions and financial services firms. The Practitioner Thought Leaders winners are announced in the Spring and the Academic Thought Leader winners are presented with their award each Fall.

About New York Life

New York Life Insurance Company, a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States* and one of the largest life insurers in the world. New York Life has the highest possible financial strength ratings currently awarded to any life ainsurer from all four of the major credit rating agencies: A.M. Best (A++), Fitch (AAA), Moody’s Investors Service (Aaa), Standard & Poor’s (AA+).** Headquartered in New York City, New York Life's family of companies offers life insurance, retirement income, investments and long-term care insurance. New York Life Investments*** provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as retail mutual funds. Please visit New York Life's Web site at www.newyorklife.com for more information.

*Based on revenue as reported by “Fortune 500, Ranked within Industries, Insurance: Life, Health (Mutual),” Fortune magazine, May 23, 2011. See http://money.cnn.com/magazines/fortune/fortune500/2011/faq/ for methodology.

**Source: Third Party Ratings Reports as of 1/25/12.

***New York Life Investments is a service mark used by New York Life Investment Management Holdings LLC and its subsidiary, New York Life Investment Management LLC.