Bequest Motives and the Annuity Puzzle

Lee Lockwood

Review of Economic Dynamics, 2012, vol. 15, issue 2, 226-243

Abstract: Few retirees annuitize any wealth, a fact that has so far defied explanation within the standard framework of forward-looking, expected utility-maximizing agents. Bequest motives seem a natural explanation. Yet the prevailing view is that people with plausible bequest motives should annuitize part of their wealth, and thus that bequest motives cannot explain why most people do not annuitize any wealth. I show, however, that people with plausible bequest motives are likely to be better off not annuitizing any wealth at available rates. The evidence suggests that bequest motives play a central role in limiting the demand for annuities. (Copyright: Elsevier)

Keywords: Annuities; Life-cycle model; Bequest motives (search for similar items in EconPapers)
JEL-codes: D14 D91 H55 J14 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (149)

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DOI: 10.1016/j.red.2011.03.001

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