Annuity Choices in Chile: A Dynamic Approach

2014. Emerging Markets Finance and Trade. Vol. 50, Supplement 5, Pp. 6 - 21

Jose Ruiz V

Abstract:

One important decision for a person near retirement pertains to how to begin the decumulation process. One option is to purchase an annuity (stream of income for the length of purchaser’s life but transfers the property of the funds to an insurance company) or take a phased withdrawal in which the retiree not only keeps the control over the funds but also retains the longevity risk and bears the capital market risk associated with the rate of return of the investments. We use data on retirees from the Chilean labor market to analyze the empirical determinants of the annuity choice.

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