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

Duš, Ivica; Maurer, Raimond; Mitchell, Olivia S.

doi:10.3386/w11271

Cited by 13 publications

(5 citation statements)

References 41 publications

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“…Through the theory that marginal utility consumption of the "elderly" (over 65 years) is decreasing but coupled with the allocation of wealth owned in financial and health investments (Börsch-Supan & Stahl, 1991). Another study found that retirees who had excess funds preferred to delay benefit annuities in hopes of gaining more in older age (Dus et al, 2005).…”

Section: Influence Of Capital Markets Inflation and Demographics On The Growth Of Pension Fund Assets In The State Organization Of Islamimentioning

confidence: 99%

Influence of Capital Markets, Inflation, and Demographics on the Growth of Pension Fund Assets in the State Organization of Islamic Cooperation

Ashari¹

2021

jefms

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The percentage of pension receipts that is still low is experienced by many developing countries in the continent of Asia and Africa in terms of providing pension funds for their citizens. This study seeks to analyze the effect of growth in pension fund assets in OIC member countries. The measurement of the growth of pension fund assets is viewed through the aspects of the number of stock traded, the equity index, the inflation rate, male labor force participation, female labor force participation, the working age, and the retirement age. In addition, this study uses a panel data regression analysis method with the period 2010 to 2019. The results show that there are variables of male labor force participation, female labor force participation, working-age, and retirement age that have a significant effect. Male labor force participation, working-age, and retirement age have a positive effect on the growth of pension fund assets, while female labor force participation has a negative effect on pension fund assets. It can be said that the demographic aspects can influence the growth of pension fund assets in OIC member countries in the period 2010 to 2019.

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Section: Influence Of Capital Markets Inflation and Demographics On The Growth Of Pension Fund Assets In The State Organization Of Islamimentioning

confidence: 99%

Influence of Capital Markets, Inflation, and Demographics on the Growth of Pension Fund Assets in the State Organization of Islamic Cooperation

Ashari¹

2021

jefms

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“…9 This finding stands in sharp contrast to standard unit-linked insurance products and traditional drawdown strategies, in which a more aggressive portfolio strategy directly translates into higher year-on-year consumption volatility. (See, e.g., Dus, Maurer, and Mitchell (2005), Horneff, Maurer, Mitchell, and Dus (2008), and Maurer, Mitchell, Rogalla, and Kartashov (2013) for a description of these products.) only on age.…”

Section: Introductionmentioning

confidence: 99%

Consumption and Portfolio Choice under Internal Multiplicative Habit Formation

Bovenberg¹,

Bilsen²,

Laeven

2019

J. Financ. Quant. Anal.

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This paper explores the optimal consumption and investment behavior of an individual who derives utility from the ratio between his consumption and an endogenous habit. We obtain closed-form policies under general utility functionals and stochastic investment opportunities by developing a nontrivial linearization to the budget constraint. This enables us to explicitly characterize how habit formation affects the marginal propensity to consume and optimal stock–bond investments. We also show that in a setting that combines habit formation with Epstein–Zin utility, consumption no longer grows at unrealistically high rates at high ages and investments in risky assets decrease.

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“…Since the underlying immediate annuity is purchased if, and only if, the investor is alive, the survival probabilities in equation (7b) must be conditioned on survival to time , and the factor   appears in the denominator of the price. Strictly speaking, the delayed payout annuity is a hybrid 5 The following researchers have analyzed the strategy of delaying the purchase of an immediate annuity: Kapur and Orszag (1999), Dushi and Webb (2004), Milevsky and Young (2003), Dus, Maurer and Mitchell (2005) and Horneff, Maurer, Mitchell, and Dus (2006). The last reference has an excellent summary of this literature.…”

Section: Delayed Purchase Annuitiesmentioning

confidence: 99%

What Makes a Better Annuity?

Scott

Watson²,

2009

SSRN Journal

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The wide gulf between actual and predicted annuity demand has been well documented. However, a comparable gap exists between the current and ideal annuity market. In a world with costly and limited annuity products, we investigate what types of new annuity products could improve annuity market participation and increase individual welfare. We find that participation gains are most likely for new annuity products that focus on late-life payouts which offer a large price discount relative to their financial market analogues. For example, the marginal utility from the first dollar allocated to a late-life annuity can be several times that of an immediate annuity. Our welfare analysis indicates that an individual's current assets suggest desirable new annuity products since annuities that lower the cost of the existing consumption plan necessarily improve welfare. Finally, we consider the implications for annuity demand if new annuity products ultimately complete the annuity market. Given access to a complete market, we find all individuals only purchase annuity contracts with a significant time gap between purchase and payout. At a minimum, enough time must pass between purchase and payout to build up a mortality discount sufficient to overcome the cost of creating the contract. Since most existing annuity products, such as immediate annuities, do not have this feature, few current annuity contract configurations are likely to survive significant product innovation. Taken together, our results indicate that there is ample opportunity for innovation to spur annuity demand and improve individual welfare.

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

Cited by 13 publications

References 41 publications

Influence of Capital Markets, Inflation, and Demographics on the Growth of Pension Fund Assets in the State Organization of Islamic Cooperation

Influence of Capital Markets, Inflation, and Demographics on the Growth of Pension Fund Assets in the State Organization of Islamic Cooperation

Consumption and Portfolio Choice under Internal Multiplicative Habit Formation

What Makes a Better Annuity?

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