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Pensions, Social Security, Wealth and Lifetime Earnings: Evidence from the Health and Retirement Study

Listed author(s):
  • William G. Gale
  • John W.R. Phillips


    (University of Michigan Retirement Research Center)

Using data from the Health and Retirement Study (HRS), we calculate the relationship between socio-economic status and a utility based measure of annuity value. We find considerable variation between groups once we take account of not only socio-economic differences in mortality, but also pre-annuitized wealth and longevity risk pooling in marriage. Using HRS data on subjective survival probabilities, we then construct a subjective life table for each individual in the HRS. We show that these tables vary appropriately between groups and aggregate closely to group level averages. We calculate the value each household would place on annuitization, based on the husband and wife's subjective life tables, and the household's degree of risk-aversion and proportion of pre-annuitized wealth. A significant minority would perceive themselves as suffering a net loss from mandatory annuitization.

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Paper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number wp2006-14.

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Length: 39 pages
Date of creation: Aug 2006
Date of revision: Aug 2006
Handle: RePEc:crr:crrwps:wp2006-14
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