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Optimal Annuitization with Stochastic Mortality Probabilities: Working Paper 2013-05

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  • Felix Reichling
  • Kent Smetters

Abstract

Economic modeling dating back to Yaari (1965) shows that individuals who do not aim to leave bequests to future generations should put all of their investments into annuities rather than alternatives such as bonds. Annuities offer higher returns than alternative investment options and protect against longevity risk—they provide income in each remaining year of life, even if an individual lives for an usually long time. This paper models decisions about purchasing annuities in a context where individuals learn new information about their health status over

Suggested Citation

  • Felix Reichling & Kent Smetters, 2013. "Optimal Annuitization with Stochastic Mortality Probabilities: Working Paper 2013-05," Working Papers 44374, Congressional Budget Office.
    • Handle: RePEc:cbo:wpaper:44374
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    File URL: https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/workingpaper/44374_MortalityProbabilities-Reichling_2_0_1.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. John Laitner & Daniel Silverman & Dmitriy Stolyarov, 2014. "Annuitized Wealth and Post-Retirement Saving," NBER Working Papers 20547, National Bureau of Economic Research, Inc.
    2. Felix Reichling & Kent Smetters, 2015. "Optimal Annuitization with Stochastic Mortality and Correlated Medical Costs," American Economic Review, American Economic Association, vol. 105(11), pages 3273-3320, November.

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