HEALTH COST RISK: A POTENTIAL SOLUTION TO THE ANNUITY PUZZLE

• 成果类型: Article
• 署名作者: Peijnenburg, Kim; Nijman, Theo; Werker, Bas J. M.
• 署名单位: Bocconi University
• 刊物名称: ECONOMIC JOURNAL
• ISSN/ISSBN: 0013-0133
• DOI: 10.1111/ecoj.12354
• 发表日期: 2017
• 页码: 1598-1625
• 关键词: long-term-care; life-cycle; individual annuities; portfolio choice; Medical expenses; bequest motives; UNITED-STATES; red herrings; MARKET; insurance

摘要

We find that health cost risk lowers optimal annuity demand at retirement. If medical expenses can be sizeable early in retirement, full annuitisation at retirement is no longer optimal because agents do not have enough time to build a liquid wealth buffer. Furthermore, large deviations from optimal annuitisation levels lead to small utility differences. Our results suggest that health cost risk can explain a large proportion of empirically observed annuity choices. Finally, allowing additional annuitisation after retirement results in welfare gains of at most 2.5% when facing health cost risk, and negligible gains without this risk.