Betting on death and capital markets in retirement

a shortfall risk analysis of life annuities versus phased withdrawal plans

Authors

  • Ivica Dus Department of Finance, Johann Wolfgang Goethe-University of Frankfurt
  • Raimond Maurer Department of Finance, Johann Wolfgang Goethe-University of Frankfurt
  • Olivia S. Mitchell The Wharton School, University of Pennsylvania

DOI:

https://doi.org/10.61190/fsr.v14i3.4825

Keywords:

Portfolio management, Phased withdrawal, Longevity risk, Mortality

Abstract

Retirees must draw down their accumulated assets in an orderly fashion, so as not to exhaust their funds too soon. We compared 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 U.S. case. Delayed annuitization may also appeal, as it offers higher expected benefits with lower expected shortfalls.

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Published

2005-09-30

Issue

Vol. 14 No. 3 (2005): FSR Fall 2005

Section

New Original Submission

License

Copyright (c) 2005 Academy of Financial Services

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How to Cite

Betting on death and capital markets in retirement: a shortfall risk analysis of life annuities versus phased withdrawal plans. (2005). Financial Services Review, 14(3), 169-196. https://doi.org/10.61190/fsr.v14i3.4825