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How Should We Insure Longevity Risk In Pensions And Social Security?

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  • Jeffrey R. Brown

Abstract

As baby boomers approach retirement, individuals and policymakers are increasingly concerned about retirement income security. Thanks to dramatic advances in life expectancy over the last century, today's typical 65-year old man and woman can expect, on average, to live to ages 81 and 85 respectively. Perhaps even more impressive, over 17 percent of 65-year old men and over 31 percent of 65-year old women are expected to live to age 90 or beyond. Most people would agree with President Clinton that increasing life expectancy is "something wonderful." However, uncertainty about length of life carries the risk that individuals may outlive their resources and be forced to substantially reduce their living standards at advanced ages. This issue in brief summarizes a growing body of research on the important role of annuities in the U.S. retirement system.

Suggested Citation

  • Jeffrey R. Brown, 2000. "How Should We Insure Longevity Risk In Pensions And Social Security?," Issues in Brief ib-4, Center for Retirement Research.
  • Handle: RePEc:crr:issbrf:ib-4
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    File URL: http://crr.bc.edu/briefs/how-should-we-insure-longevity-risk-in-pensions-and-social-security
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    References listed on IDEAS

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    1. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
    2. Olivia S. Mitchell, 1999. "New Evidence on the Money's Worth of Individual Annuities," American Economic Review, American Economic Association, vol. 89(5), pages 1299-1318, December.
    3. Bernheim, B Douglas, 1991. "How Strong Are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 899-927, October.
    4. Coronado Julia Lynn & Fullerton Don & Glass Thomas, 2011. "The Progressivity of Social Security," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-45, November.
    5. Brown, Jeffrey R., 2001. "Private pensions, mortality risk, and the decision to annuitize," Journal of Public Economics, Elsevier, vol. 82(1), pages 29-62, October.
    6. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
    7. Jeffrey Brown, 2002. "Differential Mortality and the Value of Individual Account Retirement Annuities," NBER Chapters,in: The Distributional Aspects of Social Security and Social Security Reform, pages 401-446 National Bureau of Economic Research, Inc.
    8. Amy Finkelstein & James Poterba, 1999. "Selection Effects in the Market for Individual Annuities: New Evidence from the United Kingdom," NBER Working Papers 7168, National Bureau of Economic Research, Inc.
    9. Jeffrey Brown, 2001. "Are the Elderly Really Over-Annuitized? New Evidence on Life Insurance and Bequests," NBER Chapters,in: Themes in the Economics of Aging, pages 91-126 National Bureau of Economic Research, Inc.
    10. Jeffrey R. Brown & James M. Poterba, 1999. "Joint Life Annuities and Annuity Demand by Married Couples," NBER Working Papers 7199, National Bureau of Economic Research, Inc.
    11. Jeffrey R. Brown & Olivia S. Mitchell & James M. Poterba, 2000. "Mortality Risk, Inflation Risk, and Annuity Products," NBER Working Papers 7812, National Bureau of Economic Research, Inc.
    12. Steven F. Venti & David A. Wise, 2001. "Choice, Chance, and Wealth Dispersion at Retirement," NBER Chapters,in: Aging Issues in the United States and Japan, pages 25-64 National Bureau of Economic Research, Inc.
    13. Peter A. Diamond, 1999. "What Stock Market Returns To Expect For The Future?," Issues in Brief ib-2, Center for Retirement Research.
    14. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, vol. 77(3), pages 298-312, June.
    15. Daniel S. Hamermesh, 1985. "Expectations, Life Expectancy, and Economic Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 389-408.
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    Citations

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    Cited by:

    1. Olivia S. Mitchell & David McCarthy, 2002. "Annuities for an Ageing World," NBER Working Papers 9092, National Bureau of Economic Research, Inc.
    2. repec:eee:hapoch:v1_237 is not listed on IDEAS
    3. Diamond, Peter, 2002. "Public Finance Theory - Then and Now," Journal of Public Economics, Elsevier, vol. 86(3), pages 311-317, December.
    4. Olivia S. Mitchell, 2001. "Developments in Decumulation: The Role of Annuity Products in Financing Retirement," NBER Working Papers 8567, National Bureau of Economic Research, Inc.
    5. Hinrichs, Karl, 2004. "Active Citizens and Retirement Planning: Enlarging Freedom of Choice in the Course of Pension Reforms in Nordic Countries and Germany," Working papers of the ZeS 11/2004, University of Bremen, Centre for Social Policy Research (ZeS).
    6. Fang, H., 2016. "Insurance Markets for the Elderly," Handbook of the Economics of Population Aging, Elsevier.
    7. David C. Webb, 2009. "Asymmetric Information, Long-Term Care Insurance, and Annuities: The Case for Bundled Contracts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 53-85.

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