When Saving is Not Enough - Wealth Decumulation in Retirement

47 Pages Posted: 28 Oct 2019 Last revised: 13 Nov 2019

See all articles by Pascal Kieren

Pascal Kieren

University of Mannheim

Martin Weber

University of Mannheim - Department of Banking and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 8, 2019

Abstract

We investigate the wealth decumulation decision from the perspective of a retiree who is averse to the prospect of fully annuitizing her accumulated savings. We field a large online survey of hypothetical product choices for phased drawdown offerings and annuities. While the demand for annuities remains low in our sample, we find significant demand for phased withdrawal products with equity-based asset allocations and flexible payout structures. Consistent with the product choice, the most important self-reported considerations for the wealth decumulation decision are a low probability of depleting the capital stock early, the size of the withdrawal rates, and flexibility in the timing of their withdrawal. As determinants of the decision of how much wealth individuals are willing to draw down, we identify consumers’ attitudes towards future economic conditions, the extent to which they are protected against longevity risk, and their desire to leave bequests. Policy implications are discussed.

Keywords: retirement planning, phased withdrawal accounts, annuity puzzle

JEL Classification: D14, G2, H55, J14, J26

Suggested Citation

Kieren, Pascal and Weber, Martin, When Saving is Not Enough - Wealth Decumulation in Retirement (November 8, 2019). Available at SSRN: https://ssrn.com/abstract=3471777 or http://dx.doi.org/10.2139/ssrn.3471777

Pascal Kieren (Contact Author)

University of Mannheim ( email )

Deparment of Finance, L9, 1-2
Mannheim, 68131
Germany

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

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