Annuity Valuation, Long‐Term Care, and Bequest Motives
Annuity Valuation, Long‐Term Care, and Bequest Motives
Financial security in retirement has traditionally meant having a steady flow of annuity income as long as one lives — a definition enshrined in the Social Security system. Earlier research has stressed a more holistic approach, which focuses on the match between resources and spending needs. Using this formulation this chapter estimates annuity values given long-term care concerns and bequest motives, where these estimated values are consistent with low observed demand for standard annuities. The chapter extends this model to value non-standard annuities with various security-enhancing features that may be of value to retirees.
Keywords: bequest, precautionary motive, long-term-care insurance, Medicaid aversion, consumption, reversible annuity, longevity insurance, healthcare, health shock
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