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Retirement Annuity Design in an Inflationary Climate

In: Financial Aspects of the United States Pension System

  • Zvi Bodie
  • James E. Pesando

This paper examines the tilt and risk-return characteristics of real retirement incomes provided by variable annuities tied to bills, long-term bonds, stocks and a mixed portfolio which combines all three. The analysis emphasizes the riskiness of the real value of benefits provided by conventional nominal annuities. The Rockefeller Foundation Plan, together with the "ad hoc" cost-of-living adjustments made by many large firms, are interpreted as representative market responses to increased inflation uncertainty. The paper examines the annuity designs implicit in these innovations, and shows them to be variants of the standard variable annuity.

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This chapter was published in:
  • Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1, June.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6036.
    Handle: RePEc:nbr:nberch:6036
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-70, May.
    2. Feldstein, Martin, 1980. "Inflation and the Stock Market," American Economic Review, American Economic Association, vol. 70(5), pages 839-47, December.
    3. James E. Pesando, 1981. "Employee Valuation of Pension Claims and the Impact of Indexing Initiatives," NBER Working Papers 0767, National Bureau of Economic Research, Inc.
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