We find the minimum probability of lifetime ruin of an investor who can invest in a market with a risky and a riskless asset and who can purchase a reversible life annuity. The surrender charge of a life annuity is a proportion of its value. Ruin occurs when the total of the value of the risky and riskless assets and the surrender value of the life annuity reaches zero. We find the optimal inve...

In this paper we introduce a linear bequest motive into a standard life-cycle model, both allowing for credit and annuity market imperfections. First, we characterize the consumption and wealth processes. We find that consumption is non-increasing in the linear bequest parameter for the simplest certainty case, but that the same is not true for life-span uncertainty. Second, we study the issue ...

A[I]f you observe, people always live forever when there is any annuity to be paid them An annuity is a very serious business; it comes over and over every year, and there is no getting rid of it.@ As baby boomers near retirement, policy analysts have begun to ask how this cohort will handle the process of drawing down its retirement saving. One mechanism for doing this is the life annuity, an ...

The Implied Longevity Yield: A Note on Developing an Index for Life Annuities We develop an index for tracking the dynamic behavior of life (pension) annuity payouts over time, based on the concept of self-annuitization. Our implied longevity yield (ILY) value is de…ned equal to the internal rate of return (IRR) over a …xed deferral period that an individual would have to earn on their investab...

In this article, a model of life insurance holding is formulated. It takes into account the liquidation values and liquidity of estate assets and the ability of life insurance death benefits to bypass the probate process. Tobit regressions based on the model are run using the U.S. Survey of Consumer Finances 1989 data set. The results showed net worth (fixing net liquid assets and annuity wealt...

BACKGROUND Insurance companies often offer people with diabetes ''enhanced impaired life annuity'' at preferential rates, in view of their reduced life expectancy. OBJECTIVE To assess the appropriateness of ''enhanced impaired life annuity'' rates for individuals with type 2 diabetes. Patients. There were 4026 subjects with established type 2 diabetes (but not known cardiovascular or other li...

Implied Life Credits: A Note on Developing an Index for Life Annuities In this paper the authors employ the concept of self-annuitization to develop a …nancial index for tracking the time series behavior of life annuity payouts. Aside from increasing awareness of the bene…ts of voluntary annuitization, there are a number of practical uses for such an index such as benchmarking relative competit...

Because life annuities can increase the level and decrease the volatility of lifetime consumption, economists have long been puzzled by the low demand for life annuities. One potential rational explanation is that adverse selection drives up life annuity prices, which drives down demand. We study the choice between life annuities and lump sums made by 32,000 retiring public employees. These uni...

Individuals, di¤ering in productivity and life expectancy, vote over the size and type of a collective annuity. Its type is represented by the fraction of the contributive (Bismarckian) component (based on the worker’s past earnings) as opposed to the noncontributive (Beveridgean) part (based on average contribution). The equilibrium collective annuity is either a large mostly Bismarckian progr...