Wharton Pension Research Council Working Papers

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Working Paper

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A life care annuity combines an immediate life annuity with long-term care insurance. We review empirical evidence supporting the claim that the marketing of a life care annuity will produce a lower total price for the combined product, less adverse selection in the individual annuity market, and greater availability of long-term care insurance. This paper also discusses the institutional, regulatory, and tax aspects of a life care annuity, including its future tax treatment under the recently enacted Pension Protection Act of 2006. We conclude with a numerical illustration of the tax implications of various ways of structuring the life care annuity, and compare these implications with those produced by an above-the-line deduction for qualified long-term care insurance premiums.


The published version of this Working Paper may be found in the 2008 publication: Recalibrating Retirement Spending and Saving.


life care annuities, regulation, long-term care insurance

Working Paper Number


Copyright/Permission Statement

Opinions expressed are the authors’ own, and not necessarily of the US Government or of Watson Wyatt Worldwide. All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of the Wharton School or the Pension Research Council. © 2007 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The authors thank Kyle Brown for helpful comments and discussions.

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Economics Commons



Date Posted: 17 December 2019