Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



Capital market volatility spurs interest in protecting retirement accounts; one such approach is to require money-back guarantees. Using a lifecycle model where investors have access to stocks, bonds, and tax-qualified retirement accounts, we show that such guarantees alter participant consumption, saving, and investment behavior during times of high interest rates, but impacts are even larger in a low-return environment. We conclude that abandoning guarantees could enhance old-age consumption for over 80% of retirees, particularly lower earners, without harming pre-retirement consumption. Our results are of interest for default investment options in individual retirement accounts such as the Pan-European Personal Pension Products.


individual retirement account, investment guarantee, longevity risk, retirement income, life cycle portfolio choice

JEL Code

D14, G20, G11, G51, J26

Working Paper Number


Copyright/Permission Statement

Opinions and any errors are solely those of the authors and not of the institutions with which the authors are affiliated nor any individual cited. ©2021 Horneff, Liebler, Maurer, and Mitchell.


The authors are grateful for research support from the German Investment and Asset Management Association (BVI), the Leibniz Institute for Financial Research SAFE funded by the State of Hessen, and the Pension Research Council/Boettner Center at The Wharton School of the University of Pennsylvania. We thank the Competence Center for High Performance Computing in Hessen for granting us computing time on the Goethe-HLR and Lichtenberg Cluster. Data were generously provided by the German Socio-Economic Panel and the Deutsche Bundesbank Panel on Household Finances.

Included in

Economics Commons



Date Posted: 17 October 2019