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Mortality Heterogeneity and the Distributional Consequences of Mandatory Annuitization
Author(s) -
Gong Guan,
Webb Anthony
Publication year - 2008
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/j.1539-6975.2008.00297.x
Subject(s) - economics , longevity risk , disadvantaged , life table , pooling , health and retirement study , actuarial science , wife , demographic economics , pension , demography , medicine , gerontology , economic growth , finance , population , artificial intelligence , sociology , computer science , political science , law
This article investigates the distributional consequences of mandatory annuitization. Using Health and Retirement Study (HRS) data and accounting for longevity risk pooling within marriage and preannuitized wealth, we find substantial redistribution away from disadvantaged groups in expected utility terms. Using HRS data on subjective survival probabilities, we construct a subjective life table for each individual in the HRS. We calculate the value each household would place on annuitization, based on the husband and wife's subjective life tables, and the household's degree of risk aversion and proportion of preannuitized wealth. A significant minority would perceive themselves as suffering a loss from mandatory annuitization.