NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Ivica Dus, Raimond Maurer, Olivia S. Mitchell

NBER Working Paper No. 11271
Issued in April 2005
NBER Program(s):   AG   LS

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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Document Object Identifier (DOI): 10.3386/w11271

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.

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