Money-Back Guarantees in Individual Retirement Accounts: Are They Good Policy?

Vanya Horneff, Daniel Liebler, Raimond Maurer and Olivia Mitchell

No 26406, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Pension products embedding guarantees have been adopted worldwide, including in the Pan-European Personal Pension Products (PEPP) recently launched in the European Union. Using an economic life cycle model where investors have access to stocks, bonds, and tax-qualified retirement accounts, we show that abandoning the guarantee could enhance old-age consumption for over 75% of retirees without harming pre-retirement consumption. Life cycle funds offer an alternative for capital preservation, but they would produce lower average payouts. Investors averse to equity losses accumulate only moderately more in guaranteed accounts, as these offer only limited protection against market crashes.

JEL-codes: D14 D91 G11 G5 G52 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-age and nep-dge
Note: AG LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w26406.pdf (application/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:nbr:nberwo:26406

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26406

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().