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The Increasing Annuitization of the Elderly- Estimates and Implications for Intergenerational Tranfers, Inequality, and National Saving

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  • Alan J. Auerbach
  • Laurence J. Kotlikoff
  • David N. Weil

Abstract

This paper examines changes over time in the degree to which the resources (human plus nonhuman wealth) of the elderly have been annuitized. Using data from the 1962 and 1983 Federal Reserve Surveys of Consumer Finances we find evidence of an increase in annuitization which is particularly pronounced among the older elderly (those over 75) and among women. The estimated 1983 flow of aggregate bequests to children and grandchildren would have been 20% larger were it not for this increase in annuitization. The change in annuitization may have contributed significantly to the recent decline of the U.S. national saving rate.

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  • Alan J. Auerbach & Laurence J. Kotlikoff & David N. Weil, 1992. "The Increasing Annuitization of the Elderly- Estimates and Implications for Intergenerational Tranfers, Inequality, and National Saving," NBER Working Papers 4182, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4182
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    Cited by:

    1. David N. Weil, 1996. "Intergenerational Transfers, Aging, and Uncertainty," NBER Chapters, in: Advances in the Economics of Aging, pages 321-342, National Bureau of Economic Research, Inc.
    2. Rowena A. Pecchenino & Patricia S. Pollard, 1998. "Reforming Social Security: a welfare analysis," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 19-30.
    3. Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
    4. Di Giannatale, Sonia & Roa, María José, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 8107, Inter-American Development Bank.
    5. Bernd Raffelhüschen & Jörg Schoder, 2004. "Die Freiburger Zwei-Flanken-Strategie zur Wohneigentumsförderung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 57(04), pages 3-6, February.
    6. Rowena A. Pecchenino & Patricia S. Pollard, 1998. "The transition from a-pay-as-you-go to a fully-funded Social Security System: is there a role for social insurance?," Working Papers 1997-022, Federal Reserve Bank of St. Louis.
    7. Jeffrey R. Brown & James M. Poterba, 1999. "Joint Life Annuities and Annuity Demand by Married Couples," NBER Working Papers 7199, National Bureau of Economic Research, Inc.
    8. Olivia S. Mitchell, 1999. "New Evidence on the Money's Worth of Individual Annuities," American Economic Review, American Economic Association, vol. 89(5), pages 1299-1318, December.
    9. Holzmann, Robert, 1996. "Fiscal issues of shifting from unfunded to funded pension," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34300, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Pecchenino, R.A. & Pollard, P.S., 1999. "Government Mandated Private Pensions: A Dependable Foundation for Retirement Security?," Papers 9902, Michigan State - Econometrics and Economic Theory.
    11. Jagadeesh Gokhale & Laurence J. Kotlikoff & John Sabelhaus, 1996. "Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 315-407.
    12. Arnaud Van Bellingen, 2007. "Quelles perspectives de développement pour le marché des annuités?," CREPP Working Papers 0701, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    13. Brown, Jeffrey R., 2001. "Private pensions, mortality risk, and the decision to annuitize," Journal of Public Economics, Elsevier, vol. 82(1), pages 29-62, October.
    14. Laurence J. Kotlikoff, 1998. "Simulating the Privatization of Social Security in General Equilibrium," NBER Chapters, in: Privatizing Social Security, pages 265-311, National Bureau of Economic Research, Inc.
    15. Benjamin R. Page, 2003. "Testing for a Bequest Motive Using Cross-State Variation in Bequest Taxes: Technical Paper 2003-01," Working Papers 14362, Congressional Budget Office.
    16. Laurence J. Kotlikoff, 1996. "Privatization of Social Security: How It Works and Why It Matters," NBER Chapters, in: Tax Policy and the Economy, Volume 10, pages 1-32, National Bureau of Economic Research, Inc.
    17. Douglas W. Elmendorf, "undated". "The Effect of Interest-Rate Changes on Household Saving and Consumption: A Survey," Finance and Economics Discussion Series 1996-27, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    18. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff & John Edward Sabelhaus & David N. Weil, 1994. "The annuitization of Americans' resources: a cohort analysis," Working Papers (Old Series) 9413, Federal Reserve Bank of Cleveland.
    19. Willman, Alpo, 2007. "Sequential optimization, front-loaded information, and U.S. consumption," Working Paper Series 765, European Central Bank.
    20. Luciano Fanti, 2012. "Child rearing subsidies and fertility in small open economies with life uncertainty," Discussion Papers 2012/148, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    21. William G. Gale & John Karl Scholz, 1994. "Intergenerational Transfers and the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 145-160, Fall.
    22. Sonia Di Giannatale & María José Roa, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 97397, Inter-American Development Bank.
    23. Pecchenino, Rowena A & Pollard, Patricia S, 1997. "The Effects of Annuities, Bequests, and Aging in an Overlapping Generations Model of Endogenous Growth," Economic Journal, Royal Economic Society, vol. 107(440), pages 26-46, January.
    24. Gál, Róbert Iván, 1996. "A társadalombiztosítási programok ösztönző hatásai [Incentive effects of social security programs: a survey]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 128-140.

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