The Market Value of Optimal Annuitization and Bequest Motives

Matteo Buttarazzi and Gabriele Stabile
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Matteo Buttarazzi: Dipartimento di Metodi e Modelli per L’Economia, Il Territorio e la Finanza, Sapienza-Università di Roma

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2024, pp 67-73 from Springer

Abstract: Abstract Since the seminal contribution of Yaari (1965), who showed that individuals with no bequest motive should convert all their retirement wealth into annuities, a number of papers have analysed the annuitization decision under the so-called all or nothing institutional arrangement, where immediate lifetime annuities are purchased just at a one point in time. In this paper, we investigate the effect of linear bequest motives on the annuitization decision for a retired individual who maximizes the market value of future cash flows. Finally, we present numerical examples analyzing optimal annuitization under strong or weak bequest motives.

Keywords: optimal stopping; annuities; bequest motives (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-64273-9_12

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DOI: 10.1007/978-3-031-64273-9_12

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