doi.org
Health State Transitions and Longevity Effects on Retirees’ Optimal Annuitization
December 2016 • Jing Ai, Patrick L. Brockett, Linda L. Golden, Wei Zhu
Abstract The interplay between longevity risk and health state transitions for retirees’ optimal annuitization decisions is investigated. Using a life‐cycle framework incorporating wealth levels, bequest motives, and consumption floors created by government subsidies, we examine how increased longevity in conjunction with an individual's health state transition process impacts annuity purchase decisions. Health state transition matrices are estimated from the Health and Retirement Survey (HRS) data. The effects of…