Age: Investors should increase their allocations to SPIAs as they get older, from about 50% of an average 65-year-old's portfolio to close to 60% by age 75. Allocations to variable annuities with guaranteed benefits should decrease with age.
Finance Market Risk Tolerance: Conservative investors should have a higher allocation to longevity insurance, according to Chen. Conservative investors may want approximately 60% of their portfolios in guaranteed products, while aggressive investors may want just 30%.
Wealth vs. Retirement Expenses: Retirees with a high ratio of wealth to noncovered expenses have no need for longevity insurance, Chen says. He suggests retirees with a wealth-gap ratio around 20 should allocate 40% of their assets to annuities.
Risk Preference Toward Longevity: Investors who believe they'll likely live a long life should allocate 65% of their portfolios to guaranteed products. Investors who think they'll live a short life should keep an allocation of 35%.
Bequest Goal: Investors who want to leave an inheritance to their loved ones need less longevity insurance. Their annuities allocations should favor variable annuities with guaranteed lifetime withdrawal benefits, while investors who want to spend all of their assets in retirement should use immediate annuities.

"The burden on retirees to finance their own retirement spending is growing," Chen concluded. "Most investors can avoid an extreme outcome by allocating a portion of their portfolios to insurance products that offer a guaranteed income for life. But, advisors and investors have to be careful in how they determine the proper allocation to these products."

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Top 5 factors for allocating retirement portfolios

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