Ch6 Mortality Drag

Discussion in 'SP4' started by Rajat gupta, Oct 6, 2019.

  1. Rajat gupta

    Rajat gupta Very Active Member

    Hi All,

    I have a question regarding the above topic from SP4?
    Ch6:- While discussing risks of income draw down approach, why is the case that members who defer buying an annuity will experience mortality drag (lose the subsidy from the annuitants who die early, charged for own survivor-ship), if they purchase an annuity at the end of the draw down period?

    My understanding is that price of annuity reduces as mortality increases. So, if annuitant purchase annuity at a later time than he/she may get a cheaper annuity than buying it at earlier time. Can somebody help me in understanding why it is a risk (not benefit) for annuitant ?

    Please reply asap.

    Regards,
    Rajat
     

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