Purchasing an annuity: Now or later? The role of interest rates

Due to the credit crisis, Central Banks of major world economies have engaged in unprecedented monetary activism, pushing interest rates down to historically low levels. It seems natural that investors believe that things will at a certain point go back to normal. In this context, it makes sense for retirees to ponder over postponing the purchase of an annuity. Thijs Markwat, Roderick Molenaar (both Robeco), and Juan Carlos Rodriguez (TiU) investigate whether this option has value for retirees. Two situations are evaluated: retiree can only invest in bonds, and investment in the stock market is (partly) possible.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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