Recent Developments in Life Annuity Markets and Products

Mark J. Warshawsky

in Retirement Income

Published by The MIT Press

Published in print December 2011 | ISBN: 9780262016933
Published online August 2013 | e-ISBN: 9780262301596 | DOI:
Recent Developments in Life Annuity Markets and Products

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This chapter reviews recent developments in markets for traditional life annuities and describes a number of new products. In particular, it looks at trends in, and the volatility over time of, daily simulated and actual market quotes of fixed lifetime monthly payments from single-premium immediate annuities (SPIAs) issued for $100,000. The chapter then explains how variable immediate annuity works, making the initial payout fixed across time of issuance, but introducing subsequent volatility in the stream of lifetime payouts. It also briefly explains new life annuity products and features that make the life annuity more flexible or comprehensive—inflation-indexed, enhanced liquidity, individual “defined benefit,” and lifelong distribution products. Finally, the chapter concludes with a brief analysis of the possible implications of these trends in markets and products for retirement plan design, policy, and strategy.

Keywords: traditional life annuities; immediate annuities; SPIAs; variable immediate annuity; volatility; lifetime payouts

Chapter.  6021 words.  Illustrated.

Subjects: Public Economics

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