Some US defined contribution plans offer retirees access to an annuity or lifetime income stream as payout options from their 401(k) accounts. Nevertheless, for behavioral reasons, some retirees may hesitate to elect lifetime income streams as a drawdown vehicle. To counter this, plan sponsors...

We propose an optimization criterion that yields extraordinary consumption smoothing compared to the well known results of the life-cycle model. Under this criterion we solve the related consumption and investment optimization problem faced by individuals with preferences for intertemporal...

In comparing an immediate life annuity with a payout-equivalent investment fund payout plan (self-annuitization), research to date has focused mainly on shortfall probabilities of self-annuitization. As an exception, Schmeiser and Post (2005) propose a family strategy where the chances of...

Aggregate mortality risk - the risk that the mortality trend in a population changes in a nondeterministic way - and its implications for corporate decisions has recently been the subject of lively scientific discussion. We show that aggregate mortality risk is also a key determinant for...

We focus on the decumulation decision that faces an individual upon entering retirement, and seek a rational set of choices for an individual who receives a lump-sum settlement from retirement savings programs, together with accumulated private savings and Social Security credits. In the spirit...

At the end of the deferment period a deferred annuity's policyholder can choose between receiving annuity payouts or the capital accumulated. Considering stochastic mortality improvements, this is a valuable option for the policyholder. Whenever mortality improves less than expected at contract...

Using an optimising financial planning model in the tradition of Merton (1969, 1971), and Richard (1975) we explore how individuals should determine their life insurance and annuity choices, given uncertainty about investment returns and mortality. Both consumption and bequests appear as...

The U.S. has long incentivized retirement saving in 401(k) and similar retirement accounts by permitting workers to defer taxes on contributions, levying them instead when retirees withdraw funds in retirement. This paper develops a dynamic life-cycle model to show how and whether...

This paper studies a consumption-investment problem involving health shock risk, perishable consumption, and consumption of housing services. Additionally to a risk-free asset and a stock index, the agent can invest in real estate. I analyze the impact of health shocks on the optimal consumption...

We document the pattern by which Canadians de-accumulate financial wealth during retirement – and find it rather puzzling. While the Modigliani lifecycle model can justify a variety of de-accumulation or draw down rates depending on risk preferences, the existence of asymmetric taxes imply...