The longevity annuity: : an annuity for everyone?

• Autores: Jason S. Scott
• Localización: Financial analysts journal, ISSN-e 0015-198X, Vol. 71, Nº. 1, 2015, págs. 61-69
• Idioma: inglés
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• Resumen

  • As of 2005, U.S. individuals had an estimated $7.4 trillion invested in IRAs and employer-sponsored retirement accounts. Many retirees will thus face the difficult problem of turning a pool of assets into a stream of retirement income. Purchasing an immediate annuity is a common recommendation for retirees trying to maximize retirement spending. The vast majority of retirees, however, are unwilling to annuitize all their assets. This research demonstrates that a �longevity annuity,� which is distinct from an immediate annuity in that payouts begin late in retirement, is optimal for retirees unwilling to fully annuitize. For a typical retiree, allocating 10�15 percent of wealth to a longevity annuity creates spending benefits comparable to an allocation to an immediate annuity of 60 percent or more.