Optimal annuitization with stochastic mortality probabilities / Felix Reichling, Kent Smetters.

Format:

Book

Government document

Author/Creator:

Reichling, Felix, author.

Smetters, Kent A. (Kent Andrew), author.

Contributor:

United States. Congressional Budget Office, issuing body.

Series:

Working paper series (United States. Congressional Budget Office) ; 2013-05.

Working paper ; 2013-05

Language:

English

Subjects (All):

Annuities--United States--Econometric models.

Annuities.

Mortality--United States--Econometric models.

Mortality.

Retirement--United States--Planning.

Retirement.

Mortality--Econometric models.

Retirement--Planning.

United States.

Physical Description:

1 online resource (44 pages) : illustrations.

Place of Publication:

Washington, DC : Congressional Budget Office, 2013.

Summary:

The conventional wisdom dating back to Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous market frictions do not break this sharp result. We modify the Yaari framework by allowing a household's mortality risk itself to be stochastic. Annuities still help to hedge longevity risk, but they are now subject to valuation risk. Valuation risk is a powerful gateway mechanism for numerous frictions to reduce annuity demand, even without ad hoc "liquidity constraints." We find that most households should not annuitize any wealth. The optimal level of aggregate net annuity holdings is likely even negative.

Notes:

"June 2013."

Includes bibliographical references (pages 41-44).

Description based on online resource, title from PDF cover (Archive-It, viewed July 14, 2021).

Other Format:

Print version: Reichling, Felix. Optimal annuitization with stochastic mortality probabilities

OCLC:

1262126420