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Annuities and Retirement Satisfaction

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  • Constantijn W.A. Panis

Abstract

This paper analyzes pre-retirement expectations and post-retirement satisfaction, in particular their association with the degree to which retirees' financial resources are in the form of annuities. Using the 1992-2000 Health and Retirement Study (HRS), the author finds that most retirees are very satisfied with their overall situation, but the degree of satisfaction varies substantially with retirees' characteristics. In particular, people in better health and with more financial resources tend to be more satisfied. Holding constant the present value of retirement resources and other factors, the author finds that retirees who can finance more of their consumption in retirement from pension annuities (vs. Social Security benefits and accumulated savings) are more satisfied. Retires with lifelong annuities also tend to maintain their level of satisfaction during retirement, whereas those without tend to become less satisfied over time. The author finds the very same patterns with alternative depression-related measures of well-being in retirement. The findings have important implications for the well-being of future American retirees, who are increasingly reliant on DC pension plans rather than the traditional DB pensions.

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File URL: http://www.rand.org/content/dam/rand/pubs/drafts/2008/DRU3021.pdf
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Bibliographic Info

Paper provided by RAND Corporation Publications Department in its series Working Papers with number 03-17.

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Length: 36 pages
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:ran:wpaper:03-17

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  1. Olivia S. Mitchell, . "New Trends in Pension Benefit and Retirement Provisions," Pension Research Council Working Papers 2000-1, Wharton School Pension Research Council, University of Pennsylvania.
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Cited by:
  1. Susann Rohwedder, 2006. "Self-Assessed Retirement Outcomes: Determinants and Pathways," Working Papers wp141, University of Michigan, Michigan Retirement Research Center.
  2. Calvo, Esteban & Haverstick, Kelly & Sass, Steven, 2007. "A Gradual Exit may Not Make for a Happier Retirement?," MPRA Paper 5605, University Library of Munich, Germany.
  3. Blake, David & Cairns, Andrew & Dowd, Kevin, 2008. "Turning pension plans into pension planes: What investment strategy designers of defined contribution pension plans can learn from commercial aircraft designers," MPRA Paper 33749, University Library of Munich, Germany.
  4. Blake, David & Wright, Douglas & Zhang, Yumeng, 2014. "Age-dependent investing: Optimal funding and investment strategies in defined contribution pension plans when members are rational life cycle financial planners," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 105-124.
  5. Garry F. Barrett & Milica Kecmanovic, 2012. "Changes in Subjective Well-being with Retirement: Assessing Savings Adequacy in Australia," Social and Economic Dimensions of an Aging Population Research Papers 296, McMaster University.
  6. Blake, David & Boardman, Tom, 2010. "Spend more today: Using behavioural economics to improve retirement expenditure decisions," MPRA Paper 34234, University Library of Munich, Germany.
  7. Calvo, Esteban & Haverstick, Kelly & Sass, Steven, 2007. "What Makes Retirees Happier: A Gradual or 'Cold Turkey' Retirement?," MPRA Paper 5607, University Library of Munich, Germany.

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