“Do All State and Local Workers Receive an Annuity in Retirement?” by Jean-Pierre Aubry and Kevin Wandrei (SLP No. 79, August 2021, .pdf and Excel format, 6p.).
crr.bc.edu/briefs/do-all-state-and-local-workers-receive-an-annuity-in-retirement/
September 1, 2021
CAAR – Center for Retirement Research at Boston College Issue Brief – September 1, 2021
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March 26, 2021
CAAR – University of Pennsylvania, Wharton School, Pension Research Council Working Papers – March 26, 2021
A. “Testing Methods to Enhance Longevity Awareness,” by Abigail Hurwitz, Olivia S. Mitchell, and Orly Sade (WP2021-07, November 2020, .pdf format, 47p.). Note: A link to the abstract and the full-text of this paper is available at:
repository.upenn.edu/prc_papers/700/
B. “Auctioning Annuities,” by Gaurab Aryal, Eduardo Fajnzylber, Maria F. Gabrielli, and Manuel Willington (WP2021-06, January 2021, .pdf format, 50p.). Note: A link to the abstract and the full-text of this paper is available at:
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March 16, 2021
CAAR – National Bureau of Economic Research Working Paper – March 16, 2021
Links to an abstract are available. for full text availability check your organizations library. “Discount Rates, Mortality Projections, And Money’s Worth Calculations For Us Individual Annuities,” by James M. Poterba & Adam Solomon (w28557, march 2021, .pdf format, 32p.).
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March 10, 2021
CAAR – Center for Retirement Research at Boston College Working Paper – March 10, 2021
“The Value of Annuities,” by Gal Wettstein, Alicia H. Munnell, Wenliang Hou and Nilufer Gok (WP No. 2021-5, March 2021, .pdf and Excel format, 33p.). Note: A link to the abstract and the full-text of this paper is available at:
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March 8, 2021
CAAR – Center for Retirement Research at Boston College Issue Brief – March 8, 2021
“What Is the Value of Annuities?” by Gal Wettstein, Alicia H. Munnell, Wenliang Hou, and Nilufer Gok (IB No. 21-5, March 2021, .pdf and Excel format, 8p.).
crr.bc.edu/briefs/what-is-the-value-of-annuities/
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January 11, 2021
CAAR – Center for Retirement Research at Boston College Issue Brief – January 11, 2021
“How Best to Annuitize Defined Contribution Assets?” by Alicia H. Munnell, Gal Wettstein and Wenliang Hou (IB No. 21-1, January 2021, .pdf and Excel format, 11p.).
crr.bc.edu/briefs/how-best-to-annuitize-defined-contribution-assets-2/
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August 17, 2020
CAAR – National Bureau of Economic Research Working Paper – August 17, 2020
Links to an abstract are available. For full text availability check your organization’s library. “Survival Pessimism and the Demand for Annuities,” by Cormac O’Dea and David Sturrock (w27677, August 2020, .pdf format, 36p.).
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July 29, 2020
CAAR – University of Pennsylvania, Wharton School, Pension Research Council Working Papers – July 29, 2020
A. “Auto-Enrollment Retirement Plans for the People: Choices and Outcomes in OregonSaves,” by John Chalmers, Olivia S. Mitchell, Jonathan Reuter, and Mingli Zhong (WP2020-15, July 2020, .pdf format, 26p.). Note: A link to the abstract and the full-text of this paper is available at:
repository.upenn.edu/prc_papers/685/
B. “New Financial Instruments for Managing Longevity Risk,” by John Kiff (WP2020-16, July 2020, .pdf format, 42p.). Note: A link to the abstract and the full-text of this paper is available at:
repository.upenn.edu/prc_papers/684/
C. “State-sponsored Pensions for Private Sector Workers: The Case for Pooled Annuities and Tontines,” by Richard K. Fullmer and Jonathan Barry Forman (WP2020-17, July 2020, .pdf format, 55p.). Note: A link to the abstract and the full-text of this paper is available at:
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October 24, 2019
CAAR – Center for Retirement Research at Boston College Working Paper – October 24, 2019
“How Best to Annuitize Defined Contribution Assets?” by Alicia H. Munnell, Gal Wettstein, and Wenliang Hou (WP No. 2019-13, October 2019, .pdf and Excel format, 39p.). Note: Links to the abstract and the full text of this paper available at:
crr.bc.edu/working-papers/how-best-to-annuitize-defined-contribution-assets/
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September 16, 2019
CAAR – National Bureau of Economic Research Working Papers – September 16, 2019
Links to an abstract are available. For full text availability check your organization’s library.
A. “Retirement Policy and Annuity Market Equilibria: Evidence from Chile,” by Gastón Illanes and Manisha Padi (w26285, September 2019, .pdf format, 58p.).
B. “Work after Retirement: Worklife Transitions of Career Public Employees,” by Robert L. Clark, Robert G. Hammond, and Siyan Liu (w26272, September 2019, .pdf format, 34p.).
C. “Does Automatic Enrollment Increase Contributions to Supplement Retirement Programs by K-12 and University Employees?” by Robert L. Clark and Denis Pelletier (w26263, September 2019, .pdf format, 31p.).
D. “Primary Care Physician Practice Styles and Patient Care: Evidence from Physician Exits in Medicare,” by Itzik Fadlon and Jessica N. Van Parys (w26269, September 2019, .pdf format, 38p.).
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August 28, 2019
July 29, 2019
CAAR – Brookings Institution Report – July 29, 2019
“Reducing regulatory obstacles to annuities in 401(k) plans,” by J. Mark Iwry, William G. Gale, David C. John, and Victoria Johnson (July 2019, .pdf format, 36p.).
www.brookings.edu/research/reducing-regulatory-obstacles-to-annuities-in-401k-plans/
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June 27, 2019
CAAR – Brookings Institution Reports – June 27, 2019
A. “Using behavioral insights to increase annuitization rates: The role of framing and anchoring,” by Abigail Hurwitz (June 2019, .pdf format, 18p.).
B. “Automatic enrollment in 401(k) annuities: Boosting retiree lifetime income,” by Vanya Horneff, Raimond Maurer, and Olivia S. Mitchell (June 2019, .pdf format, 14p.).
www.brookings.edu/research/automatic-enrollment-in-401k-annuities-boosting-retiree-lifetime-income/
C. “Can annuities become a bigger contributor to retirement security?” by Martin Neil Baily and Benjamin H. Harris (June 2019, .pdf format, 20p.).
www.brookings.edu/research/can-annuities-become-a-bigger-contributor-to-retirement-security/
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April 11, 2019
CAAR – Federal Reserve Bank of Boston Working Paper – April 11, 2019
“Variable Annuities: Underlying Risks and Sensitivities Variable Annuities: Underlying Risks and Sensitivities,” by Imad Chahboun and Nathaniel Hoover (Supervisory Research and Analysis Working Paper 19-1, April 2019, .pdf format, 39p.). Note: Links to the abstract and the full text of this paper available at:
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March 19, 2019
CAAR – University of Pennsylvania, Wharton School, Pension Research Council Working Paper – March 19, 2019
“Behavioral Impediments to Valuing Annuities: Complexity and Choice Bracketing,” by Jeffrey R. Brown, Arie Kapteyn, Erzo F. P. Luttmer, Olivia S. Mitchell, and Anya Samek (WP2019-5, February 2019, .pdf format, 34p.).
pensionresearchcouncil.wharton.upenn.edu/wp-content/uploads/2019/03/WP-2019-5-Brown-et-al.pdf
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February 7, 2019
CAAR – Institute for Fiscal Studies [UK] Working Paper – February 7, 2019
“Survival pessimism and the demand for annuities,” by Cormac O’Dea and David Sturrock (WP19/02, January 2019, .pdf format, 28p.). Note: Links to the abstract and the full text of the paper available at:
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January 10, 2019
January 3, 2019
CAAR – Employee Benefit Research Institute Issue Brief – January 3, 2019
“Deferred Income Annuity Purchases: Optimal Levels for Retirement Income Adequacy,” by Jack VanDerhei (January 2019, .pdf format, 19p.). Note: Registration is required to access content at EBRI.
www.ebri.org/content/deferred-income-annuity-purchases-optimal-levels-for-retirement-income-adequacy
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December 10, 2018
CAAR – National Bureau of Economic Research Working Papers – December 10, 2018
Links to an abstract are available. For full text availability check your organization’s library.
A. “Annuity Pricing in Public Pension Plans: Importance of Interest Rates,” by Nino Abashidze, Robert L. Clark, Beth Ritter, and David Vanderweide (w25343, December 2018, .pdf format, 37p.).
B. “The Effects of Medicare Advantage on Opioid Use,” by Laurence C. Baker, Kate Bundorf, and Daniel Kessler (w25327, December 2018, .pdf format, 28p.).
C. “The Long-run Impact of New Medical Ideas on Cancer Survival and Mortality,” by Frank R. Lichtenberg (w25328, December 2018, .pdf format, 19p.).
D. “Two Hundred Years of Health and Medical Care: The Importance of Medical Care for Life Expectancy Gains,” by Maryaline Catillon, David Cutler, and Thomas Getzen (w25330, December 2018, .pdf format, 56p.).
E. “The Effect of Economic Conditions on the Disability Insurance Program: Evidence from the Great Recession,” by Nicole Maestas, Kathleen J. Mullen, and Alexander Strand (w25338, December 2018, .pdf format, 33p.).
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October 11, 2018
CAAR – National Bureau of Economic Research Working Papers – October 11, 2018
Links to an abstract are available. For full text availability check your organization’s library.
A. “Happiness at Different Ages: The Social Context Matters,” by John F. Helliwell, Max B. Norton, Haifang Huang, and Shun Wang (w25121, October 2018, .pdf format, 36p.).
B. “Navigating Complex Financial Decisions at Retirement: Evidence from Annuity Choices in Public Sector Pensions,” by Robert L. Clark, Robert G. Hammond, and David Vanderweide (w25129, October 2018, .pdf format, 34p.).
C. “Fatal Attraction? Extended Unemployment Benefits, Labor Force Exits, and Mortality,” by Andreas Kuhn, Stefan Staubli, Jean-Philippe Wuellrich, and Josef Zweimüller (w25124, October 2018, .pdf format, 42p.).
D. “How Will Persistent Low Expected Returns Shape Household Economic Behavior?” by Vanya Horneff, Raimond Maurer, and Olivia S. Mitchell (w25133, October 2018, .pdf format, 20p.).
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September 25, 2018
CAAR – National Bureau of Economic Research Working Papers – September 25, 2018
Links to an abstract are available. For full text availability check your organization’s library.
A. “The Pivotal Role of Fairness: Which Consumers Like Annuities?” by Suzanne B. Shu, Robert Zeithammer, and John W. Payne (w25067, September 2018, .pdf format, 23p.).
B. “The Chinese Pension System,” by Hanming Fang and Jin Feng (w25088, September 2018, .pdf format, 40p.).
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April 4, 2018
CAAR – Center for Retirement Research at Boston College Issue Brief – April 4, 2018
“Could “Tontines” Expand the Market for Longevity Insurance?” by Gal Wettstein (IB No. 18-7, April 2018, .pdf format, 5p.).
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December 11, 2017
CAAR – National Bureau of Economic Research Working Paper – December 11, 2017
Links to an abstract are available. For full text availability check your organization’s library. “Behavioral Impediments to Valuing Annuities: Evidence on the Effects of Complexity and Choice Bracketing,” by Jeffrey R. Brown, Arie Kapteyn, Erzo F.P. Luttmer, Olivia S. Mitchell, and Anya Samek (w24101, December 2017, .pdf format, 32p.).
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August 17, 2017
February 9, 2017
CAAR – Employee Benefits Research Institute Issue Brief – February 9, 2017
“How Does the Level of Household Savings Affect Preference for Immediate Annuities?” by Sudipto Banerjee (Issue Brief No. 430, February 2017, .pdf format, 20p.).
www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=3415
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December 8, 2016
October 10, 2016
CAAR – University of Pennsylvania, Wharton School, Pension Research Council Working Papers – October 10, 2016
Note: Free registration is required to access any content.
A. “Removing the Legal Impediments to Offering Lifetime Annuities in Pension Plans,” by Jonathan Barry Forman (WP2016-6, August 2016, .pdf format, 54p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1347
B. “Research Report from the INPARR Conference on Research Challenges for Global Pensions: Trends and Heterogeneity,” by Julie Agnew, Olivia S. Mitchell, John Piggott, James Nazroo, Monika Butler, Theo Nijman, Jessica Mosher, Phyllis Borzi, Agar Brugiavini, Satoshi Shimizutani, and David McCarthy (WP2016-08, August 2016, .pdf format, 15p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1348
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September 23, 2016
CAAR – UK House of Commons Library Briefing Paper – September 23, 2016
“Secondary annuities market,” by Djuna Thurley (CBP-7707, September 2016, .pdf format, 22p.).
researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7707
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August 10, 2016
CAAR – Center for Retirement Research at Boston College Issue Briefs – August 10, 2016
A. “How Job Options Narrow for Older Workers by Socioeconomic Status,” by Matthew S. Rutledge, Steven A. Sass and Jorge D. Ramos-Mercado (IB No. 16-13, August 2016, .pdf format, 6p.).
crr.bc.edu/briefs/how-job-options-narrow-for-older-workers-by-socioeconomic-status/
B. “How Can We Realize the Value That Annuities Offer in a 401(k) World?” by Steven A. Sass (IB No. 16-12, July 2016, .pdf format, 9p.).
crr.bc.edu/briefs/how-can-we-realize-the-value-that-annuities-offer-in-a-401k-world/
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November 12, 2015
CAAR – International Longevity Centre [UK] Report – November 12, 2015
“Pension Pots and How to Survive Them,” by Les Mayhew, David Smith, and Douglas Wright (November 2015, .pdf format, 31p.).
www.ilcuk.org.uk/index.php/publications/publication_details/pension_pots_and_how_to_survive_them
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September 2, 2015
CAAR – Employee Benefit Research Institute Periodical – September 2, 2015
EBRI Notes (Vol. 36, No. 8, August 2015, .pdf format). Note: The articles in this issue are: “Investment Options and HSAs: Findings from the EBRI HSA Database,” by Paul Fronstin; and, “How Much Can Qualifying Longevity Annuity Contracts Improve Retirement Security?” by Jack VanDerhei.
www.ebri.org/publications/notes/index.cfm?fa=notesDisp&content_id=3264
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CAAR – University of Pennsylvania, Wharton School, Pension Research Council Working Papers – September 2, 2015
Note: Free registration is required to access any content.
A. “Risk Disclosure in the European Insurance Industry: Implications for Occupational Pension Funds,” by Karel Van Hulle (WP2015-17, August 2015, .pdf format, 42p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1284
B. “Mark-to-Market Accounting for United States Corporate Pensions: Implementation and Impact,” by Joseph Busillo, Thomas Harvey, and Bryan Hoffman (WP2015-16, August 2015, .pdf format, 27p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1283
C. “Accounting-based Asset Return Smoothing in Participating Life Annuities: Implications for Annuitants, Insurers, and Policymakers,” by Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, and Ivonne Siegelin (WP2015-15, August 2015, .pdf format, 18p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1282
D. “The New Insurance Supervisory Landscape: Implications for Insurance and Pensions,” by Peter A. Fisher (WP2015-14, August 2015, .pdf format, 39p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1281
E. “Implications of the New Regulatory Order for Retirement System Risk Management,” by Olivia S. Mitchell, Raimond Maurer, and J. Michael Orszag (WP2015-13, August 2015, .pdf format, 13p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1280
F. “The Role of Time Preferences and Exponential-Growth Bias in Retirement Savings,” by Gopi Shah Goda, Matthew R. Levy, Colleen Flaherty Manchester, Aaron Sojourner, and Joshua Tasoff (WP2015-11, August 2015, .pdf format, 93p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1278
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June 22, 2015
March 31, 2015
CAAR – Center for Retirement Research at Boston College Issue Brief – March 31, 2015
“Are Cognitive Constraints a Barrier to Annuitization?” by Jeffrey R. Brown, Arie Kapteyn, Erzo F.P. Luttmer and Olivia S. Mitchell (IB 15-06, March 2015, .pdf format, 7p.).
crr.bc.edu/briefs/are-cognitive-constraints-a-barrier-to-annuitization/
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March 23, 2015
CAAR – University of Pennsylvania, Wharton School, Pension Research Council Working Paper – March 23, 2015
Note: PRC requires free registration before providing working papers. “Cognitive Constraints on Valuing Annuities,” by Jeffrey R. Brown, Arie Kapteyn, Erzo F. P. Luttmer, and Olivia S. Mitchell (WP2015-04, March 2015, .pdf format, 33p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1258
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November 6, 2014
CAAR – Brookings Institution Paper – November 6, 2014
“Better Financial Security in Retirement? Realizing the Promise of Longevity Annuities,” by Katharine G. Abraham and Benjamin H. Harris (November 2014, .pdf format, 20p.). Note: Links to the abstract and the full text of the paper available at:
www.brookings.edu/research/papers/2014/11/06-retirement-longevity-annuities-harris
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October 6, 2014
CAAR – Pension Research Council, Wharton School, University of Pennsylvania Working Paper – October 6, 2014
Note: PRC requires free registration before providing working papers.
“Cognitive Constraints on Valuing Annuities,” by Jeffrey R. Brown, Arie Kapteyn, Erzo F.P. Luttmer, and Olivia S. Mitchell (WP2014-21, October 2014, .pdf format, 31p.). Note: Links to the abstract and the full text of the paper available at:
www.pensionresearchcouncil.org/publications/document.php?file=1215
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September 15, 2014
CAAR – Pension Research Council, Wharton School, University of Pennsylvania Working Paper – September 15, 2014
Note: PRC requires free registration before providing working papers.
“Optimal Portfolio Choice in Retirement with Participating Life Annuities,” by Ralph Rogalla (WP2014-20, September 2014, .pdf format, 31p.).
www.pensionresearchcouncil.org/publications/document.php?file=1209
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August 4, 2014
CAAR – National Bureau of Economic Research Working Paper – August 4, 2014
Links to an abstract are available. For full text availability check your organization’s library. “Riding the Bubble? Chasing Returns into Illiquid Assets,” by Danny Yagan (w20360, August 2014, .pdf format, 25p.).
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July 31, 2014
CAAR – Pensions Institute Working Paper, Report – July 31, 204
A. “The Consequences of Not Having to Buy an Annuity,” by David Burke (PI-1409, June 2014, .pdf format, 14p.). Note: There is no abstract for this paper.
www.pensions-institute.org/workingpapers/wp1409.pdf
B. “The Future of Retirement Income: Retirement income after the 2014 Budget,” by Debbie Harrison and David Blake (July 2014, .pdf format, 38p.).
www.pensions-institute.org/reports/Futureofretirementincome.pdf
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July 25, 2014
CAAR – International Longevity Centre [UK] Report – July 25, 2014
“Whither UK annuities?” by Jonquil Lowe (July 2014, .pdf format, 18p.).
www.ilcuk.org.uk/index.php/publications/publication_details/whither_uk_annuities
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July 17, 2014
CAAR – Brookings Institution Presentation – July 17, 2014
“A Proposal to Increase Annuitization of 401(k) Wealth Using Automatic Features,” by William G. Gale (July 2014, .pdf format, 9p.).
www.brookings.edu/research/presentations/2014/07/14-increase-annuitization-of-401k-gale
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June 11, 2014
CAAR – Center for Economic Studies/Ifo Institute for Economic Research (CESifo) [Munich, Bavaria, Germany] Working Paper – June 11, 2014
“Stimulating Annuity Markets,” by Ben J. Heijdra, Jochen O. Mierau, and Timo Trimborn (CESifo Working Paper No. 4827, June 2014, .pdf format, 31p.). Note: Links to the abstract and full-text can be found at:
www.cesifo-group.de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=19112534
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March 3, 2014
CAAR – Pension Research Council, Wharton School, University of Pennsylvania Working Paper – March 3, 2014
Note: PRC requires free registration before providing working paper.
“Accounting and Actuarial Smoothing of Retirement Payouts in Participating Life Annuities,” by Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, and Ivonne Siegelin (WP2014-02, February 2014, .pdf format, 43p.).
Abstract:
Life insurers use accounting and actuarial techniques to smooth reporting of firm assets and liabilities, seeking to transfer surpluses in good years to cover benefit payouts in bad years. Yet these techniques been criticized as they make it difficult to assess insurers’ true financial status. We develop stylized and realistically-calibrated models of participating lifetime annuities, an insurance product that pays retirees guaranteed lifelong benefits along with variable nonguaranteed surplus. Our goal is to illustrate how accounting and actuarial techniques for this product shape policyholder wellbeing as well as insurer profitability and stability. We show that smoothing adds value to both the annuitant and the insurer, so curtailing smoothing could undermine the market for long-term retirement payout products.
www.pensionresearchcouncil.org/publications/document.php?file=1168
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September 11, 2013
CAAR – Pensions Institute (Cass Business School, City University of London) [UK] Working Paper – September 11, 2013
“Longevity Insurance Annuities: Lessons from the United Kingdom,” David Blake and John A. Turner (PI13-05, July 2013, .pdf format, 12p.).
Abstract:
Recent U.S. Treasury Department proposals have focused attention on longevity insurance annuities. These are deferred annuities that began payment at advanced older ages, such as at age 82. While the United Kingdom has by far the world’s largest annuity market, and some insurance companies used to provide longevity insurance annuities, currently no companies provide these annuities. The main reason this change has occurred is that proposed European Union regulations will require insurance companies to increase their reserves for these annuities in recognition that there is no asset available to effectively hedge the risk of unexpectedly large improvements in life expectancy.
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July 30, 2013
CAAR – University of Michigan Retirement Research Center Working Papers – July 30, 2013
A. “Optimal Life Cycle Portfolio Choice with Variable Annuities Offering Liquidity and Investment Downside Protection,” by Vanya Horneff, Raimond H. Maurer, Olivia S. Mitchell and Ralph Rogalla (WP 2013-286, June 2013, .pdf format, 30p.). Note: Links to the abstract and full-text can be found at:
www.mrrc.isr.umich.edu/publications/index_abstract.cfm?ptid=1&pid=902
B. “Representativeness of the Low-Income Population in the Health and Retirement Study,” by Erik Meijer and Lynn Karoly (WP 2013-273, July 2013, .pdf format, 33p.). Note: Links to the abstract and full-text can be found at:
www.mrrc.isr.umich.edu/publications/index_abstract.cfm?ptid=1&pid=904
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July 15, 2013
CAAR – National Bureau of Economic Research Working Papers – July 15, 2013
A. “Optimal Life Cycle Portfolio Choice with Variable Annuities Offering Liquidity and Investment Downside Protection,” by Vanya Horneff, Raimond Maurer, Olivia S. Mitchell, and Ralph Rogalla (w19206, July 2013, .pdf format, 39p.).
Abstract:
We evaluate lifecycle consumption and portfolio allocation patterns resulting from access to Guaranteed Minimum Withdrawal Benefit (GMWB) variable annuities, one of the most rapidly-growing financial innovations over the last two decades. A key feature of these products is that they offer access to equity investments with downside protection, hedging of longevity risk, and partially-refundable premiums. Welfare rises since policyholders exercise the product’s flexibility by taking withdrawals and dynamically adjusting their portfolios and consumption streams. Consistent with observed behavior, differences across individuals’ cash out and annuitization patterns result from variations in realized equity market returns and labor income trajectories.
B. “Optimal Annuitization with Stochastic Mortality Probabilities,” by Felix Reichling and Kent Smetters (w19211, July 2013, .pdf format, 39p.).
Abstract:
The conventional wisdom dating back to Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous market frictions do not break this sharp result. We modify the Yaari framework by allowing a household’s mortality risk itself to be stochastic. Annuities still help to hedge longevity risk, but they are now subject to valuation risk. Valuation risk is a powerful gateway mechanism for numerous frictions to reduce annuity demand, even without ad hoc ‘liquidity constraints.’ We find that most households should not annuitize any wealth. The optimal level of aggregate net annuity holdings is likely even negative.
C. “Did Age Discrimination Protections Help Older Workers Weather the Great Recession?” by David Neumark and Patrick Button (w19216, July 2013, .pdf format, 22p.).
Abstract:
We examine whether stronger age discrimination laws at the state level moderated the impact of the Great Recession on older workers. We use a difference-in-difference-in-differences strategy to compare older workers in states with stronger and weaker laws, to their prime-age counterparts, both before, during, and after the Great Recession. We find very little evidence that stronger age discrimination protections helped older workers weather the Great Recession, relative to younger workers. The evidence sometimes points in the opposite direction, with stronger state age discrimination protections associated with more adverse effects of the Great Recession on older workers. We suggest that this may be because stronger age discrimination laws protect older workers in normal times, but during an experience like the Great Recession severe labor market disruptions make it difficult to discern discrimination, weakening the effects of stronger state age discrimination protections.
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July 1, 2013
CAAR – National Bureau of Economic Research Working Papers – July 1, 2013
A. “Decision Complexity as a Barrier to Annuitization,” by Jeffrey R. Brown, Arie Kapteyn, Erzo F.P. Luttmer, and Olivia S. Mitchell (w19168, June 2013, .pdf format, 37p.).
Abstract:
We show that people have difficulty valuing annuities, and this, instead of a preference for lumpsums, helps explain observed low annuity demand. Although the median price at which people are willing to sell an annuity stream is close to the actuarial value, many responses diverge greatly from optimizing behavior. Moreover, people will pay substantially less to buy than to sell annuities. We conclude that boundedly rational consumers adopt “buy low, sell high” heuristics when confronting a complex trade-off. This suggests that many consumers do not make optimizing decisions, underscoring the difficulty of explaining cross-sectional annuity valuation differences using standard models.
B. “Evolving Choice Inconsistencies in Choice of Prescription Drug Insurance,” by Jason Abaluck and Jonathan Gruber (w19163, June 2013, .pdf format, 47p.).
Abstract:
We explore choice inconsistency over time within the Medicare Part D Prescription Drug Program. Using the full universe of Part D claims data, we revisit our earlier work on partial data to replicate our results showing large “foregone savings” among Part D enrollees. We also document that this foregone savings increases over time during the first four years of the Part D program. We then develop a rich dynamic structural framework that allows us to mathematically decompose the “foregone welfare” from inconsistent plan choices into components due to demand side factors, supply side factors, and changes in preferences over time. We find that the welfare cost of choice inconsistencies increases over time. Most importantly, we find that there is little improvement in the ability of consumers to choose plans over time; we identify and estimate little learning at either the individual or cohort level over the years of our analysis. Inertia does reduce welfare, but even in a world with no inertia we estimate that substantial welfare losses would remain. We conclude that the increased choice inconsistencies over time are driven by changes on the supply side that are not offset both because of inertia and because non-inertial consumers still make inconsistent choices.
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