Working Paper: NBER ID: w25067
Authors: Suzanne B. Shu; Robert Zeithammer; John W. Payne
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.
Keywords: Annuities; Consumer Behavior; Fairness; Retirement Planning
JEL Codes: G02; G22; M31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| perceived fairness (D63) | annuity preference (G23) |
| perceived fairness rated as completely fair (D63) | probability of being an annuity hater (G52) |
| risk aversion (D81) | annuity preference (G23) |
| information presentation (Y20) | consumer interest in annuities (G52) |