What Makes Annuitization More Appealing?

John Beshears, James Choi, David Laibson, Brigitte Madrian and Stephen Zeldes

No 18575, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We conduct and analyze two large surveys of hypothetical annuitization choices. We find that allowing individuals to annuitize a fraction of their wealth increases annuitization relative to a situation where annuitization is an "all or nothing" decision. Very few respondents choose declining real payout streams over flat or increasing real payout streams of equivalent expected present value. Highlighting the effects of inflation increases demand for cost of living adjustments. Frames that highlight flexibility, control, and investment significantly reduce annuitization. A majority of respondents prefer to receive an extra "bonus" payment during one month of the year that is funded by slightly lower payments in the remaining months. Concerns about later-life income, spending flexibility, and counterparty risk are the most important self-reported motives that influence the annuitization decision.

JEL-codes: D03 D14 G11 J14 J32 (search for similar items in EconPapers)
Date: 2012-11
Note: AG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as What Makes Annuitization More Appealing? , John Beshears, James Choi, David Laibson, Brigitte C. Madrian, Stephen P. Zeldes. in Retirement Benefits for State and Local Employees: Designing Pension Plans for the Twenty-First Century , Clark, Rauh, and Duggan. 2014
Published as Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C. & Zeldes, Stephen P., 2014. "What makes annuitization more appealing?," Journal of Public Economics, Elsevier, vol. 116(C), pages 2-16.

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Journal Article: What makes annuitization more appealing? (2014)
Working Paper: What Makes Annuitization More Appealing? (2014)
Chapter: What Makes Annuitization More Appealing? (2012)
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