Do individuals accept fluctuations in pension income?

Tabea Bucher-Koenen, Caroline Knebel-Seitz and Martin Weber

No 23-019, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: How to invest and decumulate wealth during retirement has far-reaching consequences for consumption during retirement. We conduct an online experiment among 2,500 individuals representative of the adult German population. First, we investigate the choice between phased withdrawal plans with varying riskiness resulting in volatile retirement income. We find that 40% of the participants choose some risk and thus, accept fluctuations in retirement income. Second, we analyze the choice between the selected withdrawal plan and a lifelong annuity. Overall 56% of the respondents switch to the annuity. Switching behavior is more prevalent among individuals who chose the risk-free and medium-risk withdrawal plans as compared to the risky plan. Anchoring and fluctuation frames have small and significant effects on plan choice.

Keywords: Retirement planning; phased withdrawal plans; annuities; framing (search for similar items in EconPapers)
JEL-codes: D14 E21 G5 H55 J14 J26 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-age and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:23019

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