The Pivotal Role of Fairness: Which Consumers Like Annuities?

Suzanne B. Shu, Robert Zeithammer and John W. Payne

No 25067, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Life annuities can be a valuable component of the decumulation stage of wealth during retirement. While economists argue that most retirees should annuitize, actual demand in the marketplace is low. We analyze data from two studies to determine how measurable individual differences among consumers affect their interest in annuities. We find that a relatively high percentage of respondents dislike all annuities. Demographic factors are not predictive of which individuals dislike annuities, and individual factors predicted by economic models to be important (such as beneficiaries) have small or even opposite effects. The strongest individual differences we measured that predicts liking of annuities is the respondent’s perception of product fairness. We discuss implications of our findings for financial planners hoping to help their customers with these decumulation challenges.

JEL-codes: G02 G22 M31 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-age, nep-hpe and nep-ias
Note: AG
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Citations: View citations in EconPapers (2)

Published as Suzanne B. Shu & Robert Zeithammer & John W. Payne, 2018. "The pivotal role of fairness: Which consumers like annuities?," FINANCIAL PLANNING REVIEW, vol 1(3-4).

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