Retirement Annuity Design in an Inflationary Climate

Zvi Bodie, James E. Pesando

NBER Working Paper No. 896 (Also Reprint No. r0765)
Issued in September 1986
NBER Program(s):   PE

This paper examines the tilt and risk-return characteristics of real retirement incomes provided by variable annuities tied to bills, long-term bonds, stocks and a mixed portfolio which combines all three. The analysis emphasizes the riskiness of the real value of benefits provided by conventional nominal annuities. The Rockefeller Foundation Plan, together with the "ad hoc" cost-of-living adjustments made by many large firms, are interpreted as representative market responses to increased inflation uncertainty. The paper examines the annuity designs implicit in these innovations, and shows them to be variants of the standard variable annuity.

(467 K)

Published:

• Bodie, Zvi and James E. Pesando. "Retirement Annuity Design in an Inflationary Climate." Financial Aspects of the U.S. Pension System, edited by Zvi Bodie and John B. Shoven. Chicago: University of Chicago Press, (1983), pp . 291-324 and 322-323. ,
• Retirement Annuity Design in an Inflationary Climate, Zvi Bodie, James E. Pesando, in Financial Aspects of the United States Pension System (1983), University of Chicago Press
  

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