Working Paper: NBER ID: w11271
Authors: Ivica Dus; Raimond Maurer; Olivia S. Mitchell
Abstract: 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.
Keywords: retirement; annuities; phased withdrawal; shortfall risk
JEL Codes: G22; G23; J26; J32; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| type of withdrawal strategy (G11) | expected benefits (D61) |
| type of withdrawal strategy (G11) | shortfall risks (G32) |
| phased withdrawal strategies (J26) | liquidity and consumption potential (E21) |
| phased withdrawal strategies (J26) | expected shortfall risk (D81) |
| fixed benefit withdrawal rule (J26) | shortfall risk (G33) |
| asset exhaustion over time (D25) | shortfall risk (G33) |
| 1t rule (Y20) | expected benefits (D61) |
| 1t rule (Y20) | long-term financial security (G51) |