Resource title

Optimal Gradual Annuitization : Quantifying the Costs of Switching to Annuities

Resource image

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Resource description

We compute the optimal dynamic asset allocation policy for a retiree with Epstein-Zin utility. The retiree can decide how much he consumes and how much he invests in stocks, bonds, and annuities. Pricing the annuities we account for asymmetric mortality beliefs and administration expenses. We show that the retiree does not purchase annuities only once but rather several times during retirement (gradual annuitization). We analyze the case in which the retiree is restricted to buy annuities only once and has to perform a (complete or partial) switching strategy. This restriction reduces both the utility and the demand for annuities.

Resource author

Wolfram J. Horneff, Raimond H. Maurer, Michael Z. Stamos

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/23438

Resource license

Adapt according to the presented license agreement and reference the original author.