Fixed and Variable Longevity Annuities in Defined Contribution Plans: Optimal Retirement Portfolios Taking Social Security into Account

Vanya Horneff, Raimond Maurer and Olivia Mitchell

No 30853, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates retirees’ optimal purchases of fixed and variable longevity income annuities using their defined contribution (DC) plan assets and given their expected Social Security benefits. As an alternative, we also evaluate using plan assets to boost Social Security benefits through delayed claiming. We determine that including deferred income annuities in DC accounts is welfare enhancing for all sex/education groups examined. We also show that providing access to well-designed variable deferred annuities with some equity exposure further enhances retiree wellbeing, compared to having access only to fixed annuities. Nevertheless, for the least educated, delaying claiming Social Security is preferred, whereas the most educated benefit more from using accumulated DC plan assets to purchase deferred annuities.

JEL-codes: D91 G11 G14 G22 G53 (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-age, nep-fmk and nep-lma
Note: AG LS
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Published as Vanya Horneff & Raimond Maurer & Olivia S. Mitchell, 2023. "Fixed and variable longevity income annuities in defined contribution plans: Optimal retirement portfolios taking social security into account," Journal of Risk and Insurance, vol 90(4), pages 831-860.

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Working Paper: Fixed and variable longevity annuities in defined contribution plans: Optimal retirement portfolios taking social security into account (2023)
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