We analyze the effect of health cost risk on optimal annuity demand and consumption/savings decisions. Many retirees … take advantage of the mortality credit that annuities provide and save out of the annuity income to build a buffer for … cost risk early in retirement may resolve the annuity puzzle. Moreover, we explain the observed pattern of annuitization as …

We examine incomplete annuity menus and background risk as possible drivers of divergence from full annuitization … desired, individuals save sizeable amounts out of their annuity income to smooth consumption shocks. Similarly, adding … equity exposure. We calculate bounds on a possible bequest motive and default risk of the annuity provider and find that for …

annuity risk at retirement. Optimally, the investor allocates wealth at retirement to nominal, inflation-linked, and variable … structure variables and risk premia significantly improves the optimal annuity choice, ii) restricting the annuity menu to … the optimal investment strategy before retirement induced by the annuity demand due to inflation risk and time …