Individual Post-Retirement Longevity Risk Management Under Systematic Mortality Risk

onsdag, 02 juli 2014

This paper analyzes an individual’s post retirement longevity risk management strategy allowing for systematic longevity risk, recent product innovations, and product loadings.

A complete-markets discrete state model and multi-period simulations of portfolio strategies are used to assess individual longevity insurance product portfolios with differing levels of systematic and idiosyncratic longevity risk. Portfolios include: fixed life annuities, deferred annuities, inflation-indexed annuities, phased withdrawals and recently proposed group self-annuitization (GSA) plans. GSA plans are found to replace even inflation-indexed annuity products when there are loadings on guaranteed life annuity products. With a bequest motive and loadings, coinsurance portfolio strategies with phased withdrawals and GSA’s dominate portfolios with life annuities or deferred annuities.