TY  - JOUR
AU  - Mitchell,Olivia S.
AU  - Poterba,James M.
AU  - Warshawsky,Mark J.
TI  - New Evidence on the Money's Worth of Individual Annuities
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6002
PY  - 2000
Y2  - March 2000
UR  - http://www.nber.org/papers/w6002
L1  - http://www.nber.org/papers/w6002.pdf
N1  - Author contact info:
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

James M. Poterba
Department of Economics
MIT, E52-350
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-6673
Fax: 617/258-7804
E-Mail: poterba@nber.org

Mark Warshawsky
Towers Watson
E-Mail: mark.warshawsky@watsonwyatt.com
M2  - featured in NBER digest on 1997-10-01
AB  - This paper presents new information on the expected present discounted value of payouts on individual life annuities.  The annuity we examine is the single premium immediate life annuity, an insurance product that pays out a nominal level sum as long as the covered person lives, in exchange for an initial lump-sum premium.  This annuity offers protection against the risk of someone outliving his saving, given uncertainty about longevity. For reasonable estimates of behavioral parameters, we calculate that individual annuities are currently priced so that retirees without bequest motives should find these policies of substantial value in configuring their portfolios to smooth retirement consumption.  We also find that the expected present discounted value of payouts, relative to the initial cost of the annuity, has increased over the last decade.  These findings bear on the policy debate regarding the role of individual choice and self-reliance in retirement planning.
ER  -