Abstract
The purpose of this study is to analyze the ruin risk by incorporating the effect of mortality rate improvement and propose self-annuitization strategies. For this purpose, this study conducted an analysis using the ruin risk, which is calculated by multiplying the probability of assets falling below zero at each point in time during the lifespan by the cumulative probability of survival until that age. The analysis shows the following results: Firstly, when the mortality rate improvement is taken into account, the ruin risk increases by 2.59%p to 8.97%p depending on asset allocations. Secondly, when investments were primarily focused on principal guarantee, the ruin risk shows a significant increase as a result of mortality rate improvement. Thirdly, from the perspective of the ruin risk, the optimal investment proportion of risky assets is around 70% when considering mortality rate improvement, and around 50% when not considering mortality rate improvement. Fourthly, as retirees' age increases, the probability of asset shortfall increases rapidly when the investment proportion in deposits is high. Given that many retirees are currently invested in annuities with a principal guarantee focus, the simulation analysis of the ruin risk considering various asset allocations can provide useful insights for retirees when they consider self-annuitization strategies in the future.
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