Are Cognitive Constraints a Barrier to Annuitization?

Jeffrey Brown, Arie Kapteyn, Erzo Luttmer and Olivia Mitchell

Issues in Brief from Center for Retirement Research

Abstract: The brief’s key findings are: *Even though retirees are increasingly responsible for deciding how to draw down their assets, few buy annuities. *Researchers have offered a host of explanations for the limited take-up, but the puzzle has never been solved. *This analysis finds that valuing annuities is hard for people, so they may only buy one if offered a very good deal. *To test this finding, alternative explanations were explored and the results were negative, strengthening the conclusion that people find annuities hard to value. *These results suggest that many individuals, on their own, may have difficulty making well-informed choices about managing their money in retirement.

Pages: 7 pages
Date: 2015-03
New Economics Papers: this item is included in nep-age and nep-neu
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