The implied longevity yield: a note on developing an index for life annuities.(Column)

From: Journal of Risk and Insurance | Date: June 1, 2005| Author: | Copyright information

ABSTRACT

I develop an index for tracking the dynamic behavior of life (pension) annuity payouts over time, based on the concept of self-annuitization. Our implied longevity yield (ILY) value is defined equal to the internal rate of return (IRR) over a fixed deferral period that an individual would have to earn on their investable wealth if they decided to self-annuitize using a systematic withdrawal plan. A larger ILY number indicates a greater relative benefit from immediate annuitization. I use age 65--with a 10-year period certain--compared against the same annuity at age ...

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