Working Paper: NBER ID: w9092
Authors: Olivia S. Mitchell; David McCarthy
Abstract: Substantial research attention has been devoted to the pension accumulation process, whereby employees and those advising them work to accumulate funds for retirement. Until recently, less analysis has been devoted to the pension decumulation process -- the process by which retirees finance their consumption during retirement. This gap has recently begun to be filled by an active group of researchers examining key aspects of the pension payout market. One of the areas of most interesting investigation has been in the area of annuities, which are financial products intended to cover the risk of retirees outliving their assets. This paper reviews and extends recent research examining the role of annuities in helping finance retirement consumption. We also examine key market and regulatory factors.
Keywords: No keywords provided
JEL Codes: G2; H4; J1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| purchase of life annuities (G52) | retirement security (H55) |
| purchase of life annuities (G52) | steady income stream until death (D15) |
| steady income stream until death (D15) | reduces risk of exhausting retirement assets (D14) |
| uncertainty regarding longevity (D15) | potential asset exhaustion (D25) |
| longevity risk pooling (G52) | smoother consumption path throughout retirement (D15) |
| delaying purchase of an annuity (D15) | detrimental effects on retirement planning (J26) |
| expected present discounted value of annuity payouts (D15) | comparison to purchase price (G19) |