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Aging Issues in the United States and Japan$
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Seiritsu Ogura, Toshiaki Tachibanaki, and David A. Wise

Print publication date: 2001

Print ISBN-13: 9780226620817

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226620831.001.0001

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The Social Security System and the Demand for Personal Annuity and Life Insurance

The Social Security System and the Demand for Personal Annuity and Life Insurance

An Analysis of Japanese Microdata, 1990 and 1994

(p.105) 3 The Social Security System and the Demand for Personal Annuity and Life Insurance
Aging Issues in the United States and Japan

Seki Asano

University of Chicago Press

This chapter examines the effects of public pension benefits on Japanese households' choice of life insurance versus private annuity. Two waves of microdata, constituting the Nikkei Radar Survey (RADAR) and obtained in 1990 and 1994, provide a unique opportunity to observe the effects of changes in social security benefits, total asset values, and expectations on households' asset allocations. The intended level of total annuities increased by about 4 million yen on average from 1990 to 1994, which more than compensated for a reduction in public pension benefits. Furthermore, the age profile for mean total annuities became flatter from 1990 to 1994 across all age groups because of the younger generation's early accumulation of personal annuities. In contrast to total annuities, the mean total of life insurance stayed quite flat and stable in both periods across age groups, while intragenerational variations widened to as much as twice their 1990 levels. One hypothesis to explain this result is that households have a minimum target level of annuity and bequest. Facing declining benefits from public pensions and unfavorable future income prospects, individuals begin to accumulate personal annuities at earlier stages of their lives.

Keywords:   household asset allocation, public pension benefits, Japanese households, life insurance, private annuity, social security, retirement income

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