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 684, CFS Working Paper Series from Center for Financial Studies (CFS)

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.

Keywords: lifecycle saving; retirement plan; annuity; longevity; delayed claiming; household finance (search for similar items in EconPapers)
JEL-codes: D14 D91 G11 G22 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-age
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Fixed and Variable Longevity Annuities in Defined Contribution Plans: Optimal Retirement Portfolios Taking Social Security into Account (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:684

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