Three Essay on Annuitized Income during Retirement

This dissertation focuses on annuitized income during retirement. The average individual
goes through an economic life-cycle. It begins when the individual is independent of
others for their support. In the early stages of the life-cycle they borrow money in order
to build their human capital. Once they start earning money they pay back the debt and
begin to save money. They do this at a greater rate during the middle-stages of the life-
cycle. During the later end of the life-cycle they spend down the resources they
accumulated. The main goal during the life-cycle is to maximize the expected utility of
consumption. This happens as they smooth the marginal utility of consumption across the
different stages.
Many individuals find it hard to smooth the marginal utility of consumption over time.
There are many behavioral and economic reasons why this doesn’t happen. Annuities
have been shown to be an effective way of maximizing the expected marginal utility of
consumption as well as guard against longevity risk. There is a phenomenon called the
annuity puzzle, where many people should be in annuities but aren’t.
The 1st essay finds no statistical relationship over time between the level of annuitization
and the self-reported financial satisfaction, even though this association exists from a
cross-sectional stand point. The 2nd essay finds that mortality salience causes individuals
to prefer bequest provisions within annuities more than higher payouts. The 3rd essay
finds that delaying Social Security and using a reverse mortgage line of credit after the
investment portfolio has been depleted significantly improves the overall portfolio
survivability.