Optimal consumption and annuity equivalent wealth with mortality model uncertainty

Zhengming Li, Yang Shen and Jianxi Su

Insurance: Mathematics and Economics, 2025, vol. 120, issue C, 159-188

Abstract: The classical Yaari (1965) lifecycle model (LCM) stands as a cornerstone in numerous modern retirement studies, especially in understanding the determinants of annuity demand. The LCM predicts a high annuity demand among individuals facing retirement, yet it is rarely the case in reality. This gap between economic theory and empirical reality, commonly referred to as the annuity puzzle, has spurred extensive research endeavors aimed at elucidating its economic and behavioral underpinnings.

Keywords: Annuity puzzle; Complete annuity market; Complete bond market; Model risk; Perturbation analysis (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:120:y:2025:i:c:p:159-188

DOI: 10.1016/j.insmatheco.2024.11.009

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