Self-Annuitization, Ruin Risk in Retirement and Asset Allocation: The Annuity Benchmark
The present paper considers a retiree of a certain age with an initial endowment of investable wealth facing the following alternative investment opportunities. One possibility is to buy a single premium immediate annuity-contract. This insurance contract pays a life-long constant pension payment of a certain amount, depending e.g. on the age of the retiree, the operating cost of the insurance company and the return the company is able to realize from its investments. The alternative possibility is to invest the single premium into a portfolio of mutual funds and to periodically withdraw a fixed amount, in the present paper chosen to be equivalent to the consumption stream generated by the annuity . The particular advantage of this self annuitization strategy compared to the life annuity is its greater liquidity. However, the risk of the second opportunity is to outlive the income stream generated by this investment. The risk in this sense is specified by considering the probability of running out of money before the uncertain date of death. The determination of this personal ruin probability with respect to German mortality and capital market conditions is the objective of the following paper.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
| Length: | 19 pages |
| Date of creation: | 01 Jun 2001 |
| Handle: | RePEc:xrs:sfbmaa:01-35 |
| Note: | Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged. |
| Contact details of provider: | Postal: D-68131 Mannheim Phone: (49) (0) 621-292-2547 Fax: (49) (0) 621-292-5594 Web page: http://www.sfb504.uni-mannheim.de/ Email: More information through EDIRC Web page: http://www.sfb504.uni-mannheim.de
|
| Order Information: | Email: |
No references listed on IDEAS
You can help add them by filling out this form.
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.
When requesting a correction, please mention this item's handle: RePEc:xrs:sfbmaa:01-35. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carsten Schmidt)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.