In the News

Title

The Math of Retirement Saving and Spending

Document Type

Article

Publication Date

4-18-2016

Abstract

Nearly 50 years ago, an economist named Menahem Yaari wrote a seminal paper that found that the most effective way for consumers to manage the uncertainty of retirement is to put all their financial assets into a lifetime single premium immediate annuity at retirement. In fact, annuitization in retirement is so effective, that in his Nobel prize acceptance speech, economist Franco Modigliani dubbed what is now known as “the annuity puzzle”–the great mystery that if immediate annuities are so effective, why is the actual rate at which retirees annuitize their assets so low?