TY  - JOUR
AU  - Horneff,Wolfram J.
AU  - Maurer,Raimond H.
AU  - Mitchell,Olivia S.
AU  - Stamos,Michael Z.
TI  - Asset Allocation and Location over the Life Cycle with Survival-Contingent Payouts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14055
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14055
L1  - http://www.nber.org/papers/w14055.pdf
N1  - Author contact info:
Wolfram Horneff
Finance Department, Goethe University
Grüneburgplatz 1 (Uni-PF. H 23)
Frankfurt am Main
Germany
E-Mail: horneff@finance.uni-frankfurt.de

Raimond Maurer
Finance Department
Goethe University
Grüneburgplatz 1 (Uni-PF. H 23)
Frankfurt am Main
Germany
E-Mail: rmaurer@wiwi.uni-frankfurt.de

Olivia S. Mitchell
University of Pennsylvania
Wharton School
3620 Locust Walk, St 3000 SH-DH
Philadelphia, PA 19104-6302
Tel: 215-898-0424
Fax: 215/898-0310
E-Mail: mitchelo@wharton.upenn.edu

Michael Stamos
Finance Department, Goethe University
Kettenhofweg 139 (Uni-PF. 58)
Frankfurt am Main
Germany
E-Mail: stamos@finance.uni-frankfurt.de
AB  - This paper shows how lifelong survival-contingent payouts can enhance investor wellbeing in the context of a portfolio choice model which integrates uninsurable labor income and asymmetric mortality expectations. Our model generates optimal asset location patterns indicating how much to hold in liquid versus illiquid survival-contingent payouts over the lifetime, and also asset allocation paths, showing how to invest in stocks versus bonds. We confirm that the investor will gradually move money out of her liquid saving into survival-contingent assets to retirement and beyond, thereby enhancing her welfare by as much as 50 percent. The results are also robust to the introduction of uninsurable consumption shocks in housing expenses, income flows during the worklife and retirement, sudden changes in health status, and medical expenses.
ER  -