Mortality Heterogeneity and the Distributional Consequences of Mandatory Annuitization

25 Pages Posted: 7 Nov 2008

See all articles by Guan Gong

Guan Gong

University of Texas at Austin - Department of Economics

Anthony Webb

Boston College - Center for Retirement Research

Abstract

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.

Suggested Citation

Gong, Guan and Webb, Anthony, Mortality Heterogeneity and the Distributional Consequences of Mandatory Annuitization. Journal of Risk & Insurance, Vol. 75, Issue 4, pp. 1055-1079, December 2008. Available at SSRN: https://ssrn.com/abstract=1296897 or http://dx.doi.org/10.1111/j.1539-6975.2008.00297.x

Guan Gong (Contact Author)

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

Anthony Webb

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

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