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Morality heterogeneity and the distributional consequences of
mandatory annuitization

Guan Gong and Anthony Webb

Using data from the Health and Retirement Study (HRS), we calculate
the relationship between socio-economic status and a utility based
measure of annuity value. We find considerable variation between
groups once we take account of not only socio-economic differences
in mortality, but also pre-annuitized wealth and longevity risk pooling
in marriage. Using HRS data on subjective survival probabilities, we then
construct a subjective life table for each individual in the HRS. We show
that these tables vary appropriately between groups and aggregate closely
to group level averages. We calculate the value each household would place
on annuitization, based on the husband and wife's subjective life tables, and
the household's degree of risk-aversion and proportion of pre-annuitized wealth.
A significant minority would perceive themselves as suffering a net loss from
mandatory annuitization.