Faculty of Economics and Business Administration Publications Database

Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis in Life Annuities versus Phased Withdrawal Plans

Dus, Ivica
Mitchell, Olivia S.
Volume: 14
Number: 3
Pages: 169 - 196
ISSN-Print: 1057-0810
Link External Source: Online Version
Year: 2005
Abstract: Retirees must draw down their accumulated assets in an orderly fashion, so as not to exhaust their funds too soon. We compared alternative phased withdrawal strategies to a life annuity benchmark using German data; one particular phased withdrawal rule seems attractive, as it offers relatively low expected shortfall risk, good expected payouts for the retiree during his life, and some bequest potential. Results are similar for the U.S. case. Delayed annuitization may also appeal, as it offers higher expected benefits with lower expected shortfalls.