Health Cost Risk
A Potential Solution To the Annuity Puzzle
Bibliographic Data
| ID | 9715955 |
|---|---|
| Authors | Kim Peijnenburg (Bocconi University), Theo Nijman (Bocconi University), Bas J M Werker (0000-0001-9007-0755, Bocconi University) |
| Year | 2017 |
| Volume | 127 |
| Issue | 603 |
| Pages | 1598-1625 |
| Publication date | 2017-08-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/ecoj.12354 |
| OpenAlex | W3124753964 |
| Language | EN |
| Citations received | 1 |
| References cited | 44 |
We find that health cost risk lowers optimal annuity demand at retirement. If medical expenses can be sizeable early in retirement, full annuitisation at retirement is no longer optimal because agents do not have enough time to build a liquid wealth buffer. Furthermore, large deviations from optimal annuitisation levels lead to small utility differences. Our results suggest that health cost risk can explain a large proportion of empirically observed annuity choices. Finally, allowing additional annuitisation after retirement results in welfare gains of at most 2.5% when facing health cost risk, and negligible gains without this risk
Actuarial science · Annuity · Economics · Life annuity · Medical expenses · Pension · Welfare · Finance · Financial Literacy, Pension, Retirement Analysis · Global Health Care Issues · Insurance, Mortality, Demography, Risk Management · Medicine
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Why Do the Elderly Save? The Role of Medical Expenses
Selection Effects in the United Kingdom Individual Annuities Market
Insuring Long-Term Care in the United States
| Unique citing works | 1 |
|---|---|
| Citations per year | 0,2 |
| Citation span | 2021 - 2021 (1) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 1 |