Academy of Financial Services
An increase in the expected longevity of older Americans increases their risk of outliving their assets. Previous research examines the characteristics of individuals who tend to have a demand for immediate annuities. However, few studies look at deferred income annuities (aka longevity income). This paper first uses a probit regression to examine the age groups that are willing to allocate a positive amount to the purchase of longevity income. From amongst the individuals who are willing to allocate a positive amount, it then uses an ordered probit regression to examine the quintiles in which individuals among the different age ranges are willing to allocate their funds. The results show that, individuals who have a higher demand for the purchase of longevity income and not necessarily the ones who are willing to allocate the most funds to it. These results could be of interest to financial planners and other related practitioners.
Author(s): Zunaira Khalid, Michael A. Guillemette, Christopher M. Browning