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Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis of Life Annuities

  • Ivica Dus
  • Raimond Maurer
  • Olivia S. Mitchell

Retirees must draw down their accumulated assets in an orderly fashion, so as not to exhaust their funds too soon. We compare alternative phased withdrawal strategies to a life annuity benchmark using German data; one particular phased withdrawal rule seems attractive, as it offers relatively low expected shortfall risk, good expected payouts for the retiree during his life, and some bequest potential; results are similar for the US case. Delayed annuitization may also appeal, as it offers higher expected benefits with lower expected shortfalls. Requiring unisex mortality tables in annuity pric-ing raises women's risks under a phased withdrawal program.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11271.

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Date of creation: Apr 2005
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Publication status: published as Dus, Ivica, Raimond Maurer and Olivia S. Mitchell. "Betting On Death And Capital Marekts In Retirement: A Shortfall Risk Analysis Of Life Annuities Versus Phased Withdrawal Plans," Financial Services Review, 2005, v14(3,Fall), 169-196.
Handle: RePEc:nbr:nberwo:11271
Note: AG LS
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