EconPapers    
Economics at your fingertips  
 

Self-annuitization, ruin risk in retirement and asset allocation: the annuity benchmark

Peter Albrecht and Raimond Maurer

No 01-35, Papers from Sonderforschungsbreich 504

Abstract: The present paper considers a retiree of a certain age with an initial endowment of investable wealth facing the following alternative investment opportunities. One possibility is to buy a single premium immediate annuity-contract. This insurance contract pays a life-long constant pension payment of a certain amount, depending e.g. on the age of the retiree, the operating cost of the insurance company and the return the company is able to realize from its investments. The alternative possibility is to invest the single premium into a portfolio of mutual funds and to periodically withdraw a fixed amount, in the present paper chosen to be equivalent to the consumption stream generated by the annuity . The particular advantage of this self annuitization strategy compared to the life annuity is its greater liquidity. However, the risk of the second opportunity is to outlive the income stream generated by this investment. The risk in this sense is specified by considering the probability of running out of money before the uncertain date of death. The determination of this personal ruin probability with respect to German mortality and capital market conditions is the objective of the following paper.

Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://madoc.bib.uni-mannheim.de/2803/1/dp01_35.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnh:spaper:2803

Access Statistics for this paper

More papers in Papers from Sonderforschungsbreich 504 Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().

 
Page updated 2025-03-19
Handle: RePEc:mnh:spaper:2803