Submitted by tom on
There is an interesting op-ed in the New York Times (click here to read) that discusses the notion of a basic, inflation adjusted annuity issued and underwritten by the federal government.
The piece is written by professors at the University of Texas and Cal/Berkeley.
The core topics addressed are longevity risk and credit risk. The authors point out what they perceive to be a fundamental problem in the private annuity market--credit risk.
I am not entirely sure that the state level guarantee funds that back fixed annuities are as lacking as many believe--particularly if the discussion focuses on basic levels of annuitization that cover all Americans. In this case the annuities would likely fall within state guarantee limits.
In addition, the federal government already issues and inflation adjusted annuity that addresses longevity risk--it is called Social Security and has its own sustainability issues.
The idea of a federal backstop (above what is provided by the state) of the private annuity market is interesting.
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