Monday, June 10, 2013

Upcoming event: Retirement & Savings Forum

Join at noon on Wednesday, June 19, 2013

For a Lunch Meeting with Guest Speaker:

Felix Reichling and   Kent Smetters

Congressional Budget Office            Wharton School

Who will discuss a new CBO paper:

Optimal Annuitization with Stochastic Mortality Probabilities

Wednesday, June 19, 2013

Noon-1:00 p.m.



Fidelity Investments

325 7th St. NW

Washington, DC

(Lunch will be provided)


The conventional wisdom dating back to Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Various market frictions do not break this sharp result. This paper demonstrates that incomplete annuitization can be optimal in the presence of stochastic mortality probabilities, even without liquidity constraints. Moreover, stochastic mortality is a mechanism for various frictions to reduce annuity demand. Simulation evidence demonstrates that it is optimal for most households to not annuitize any wealth. Optimal aggregate net annuity holdings is likely even negative.

No comments: