Mortality Risk, Inflation Risk, and Annuity Products

34 Pages Posted: 25 Jul 2000 Last revised: 5 Mar 2010

See all articles by Jeffrey R. Brown

Jeffrey R. Brown

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); University of Illinois College of Law; University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA); University of Illinois at Urbana-Champaign - Department of Economics

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: July 2000

Abstract

As growing numbers of retirees reach retirement age with substantial balances in self-directed retirement plans, annuities are likely to become increasingly important instruments for drawing down retirement savings. This study explores recent trends in the pricing of single-premium annuity products in the United States. Virtually all of the annuity products currently available in the United States offer fixed nominal payouts, rather than an inflation-linked payout stream. After describing the money's worth' of the various types of nominal annuity products, this study considers the extent to which existing U.S. private annuity markets provide retirees with inflation-protected retirement income flows. Although there is effectively no market yet for inflation-indexed annuities in the United States, such products are available in other countries. The paper concludes by summarizing recent data on the pricing of both nominal and inflation-linked annuities in the United Kingdom and several other nations.

Suggested Citation

Brown, Jeffrey R. and Mitchell, Olivia S. and Poterba, James M., Mortality Risk, Inflation Risk, and Annuity Products (July 2000). NBER Working Paper No. w7812. Available at SSRN: https://ssrn.com/abstract=237134

Jeffrey R. Brown (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

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Champaign, IL 61820
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National Bureau of Economic Research (NBER) ( email )

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University of Illinois College of Law ( email )

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University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA) ( email )

Urbana, IL 61801
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University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
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Urbana, IL 61801
United States

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James M. Poterba

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-350
Cambridge, MA 02142
United States
617-253-6673 (Phone)
617-253-1330 (Fax)

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