The annuity puzzle remains a puzzle
We examine incomplete annuity menus, background risk, bequest motives, and default risk as possible drivers of divergence from full annuitization. Contrary to what is often suggested in the literature, we find that full annuitization remains optimal if saving is possible after retirement. This holds...
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| Veröffentlicht in: | Journal of economic dynamics & control 2016-09, Vol.70, p.18-35 |
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| container_title | Journal of economic dynamics & control |
| container_volume | 70 |
| creator | Peijnenburg, Kim Nijman, Theo Werker, Bas J.M. |
| description | We examine incomplete annuity menus, background risk, bequest motives, and default risk as possible drivers of divergence from full annuitization. Contrary to what is often suggested in the literature, we find that full annuitization remains optimal if saving is possible after retirement. This holds irrespective of whether real or only nominal annuities are available. Whenever liquidity is desired, individuals save sizeable amounts out of their annuity income to smooth consumption shocks. Similarly, adding equity-linked annuities to the menu does not increase welfare significantly, since individuals can invest in stocks in order to get the desired equity exposure. |
| doi_str_mv | 10.1016/j.jedc.2016.05.023 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0165-1889 |
| ispartof | Journal of economic dynamics & control, 2016-09, Vol.70, p.18-35 |
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| language | eng |
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| source | Elsevier ScienceDirect Journals |
| subjects | Annuities Annuity Asset allocation Consumption Investment policy Life-cycle portfolio choice Liquidity Savings Stocks Studies Welfare economics |
| title | The annuity puzzle remains a puzzle |
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