NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Ivica Dus

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Working Papers and Chapters

July 2006Optimizing the Retirement Portfolio: Asset Allocation, Annuitization, and Risk Aversion
with Wolfram J. Horneff, Raimond Maurer, Olivia S. Mitchell: w12392
Retirees must draw down their accumulated assets in an orderly fashion so as not to exhaust their funds too soon. We derive the optimal retirement portfolio from a menu that includes payout annuities as well as an investment allocation and a withdrawal strategy, assuming risk aversion, stochastic capital markets, and uncertain lifetimes. The resulting portfolio allocation, when fixed as of retirement, is then compared to phased withdrawal strategies such a %u201Cself-annuitization%u201D plan or the 401(k) %u201Cdefault%u201D pattern encouraged under US tax law. Surprisingly, the fixed percentage approach proves appealing for retirees across a wide range of risk preferences, supporting financial planning advisors who often recommend this rule. We then permit the retiree to switch to an annu...
April 2005Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis of Life Annuities
with Raimond Maurer, Olivia S. Mitchell: w11271
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.

Published: 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.

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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