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Retirement Annuity Design in an Inflationary Climate

47 Pages Posted: 28 Jun 2004  

Zvi Bodie

Boston University - Department of Finance & Economics

James E. Pesando

University of Toronto; National Bureau of Economic Research (NBER)

Date Written: May 1982

Abstract

This paper examines the tilt and risk-return characteristics of real retirement incomes provided by variable annuities tied to bills, long-term bonds, stocks and a mixed portfolio which combines all three. The analysis emphasizes the riskiness of the real value of benefits provided by conventional nominal annuities. The Rockefeller Foundation Plan, together with the "ad hoc" cost-of-living adjustments made by many large firms, are interpreted as representative market responses to increased inflation uncertainty. The paper examines the annuity designs implicit in these innovations, and shows them to be variants of the standard variable annuity.

Suggested Citation

Bodie, Zvi and Pesando, James E., Retirement Annuity Design in an Inflationary Climate (May 1982). NBER Working Paper No. w0896. Available at SSRN: https://ssrn.com/abstract=318840

Zvi Bodie

Boston University - Department of Finance & Economics ( email )

United States

HOME PAGE: http://www.zvibodie.com

James E. Pesando (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Toronto ( email )

Department of Economics Institute for Policy Analysis
Toronto, Ontario M5S 3E6
Canada
(416)978-8625 (Phone)
(416)978-5519 (Fax)

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