Working Paper: NBER ID: w25129
Authors: Robert L. Clark; Robert G. Hammond; David Vanderweide
Abstract: Choices regarding the disposition of wealth at retirement can have substantial implications for retirement income security. We analyze the factors determining annuity option choices offered by a public sector defined pension plan with no default annuity option. Using combined administrative records and survey data, we explore the role of individual and household characteristics as well as risk preferences, time preferences, and financial literacy. The evidence is consistent with predictions over which households might benefit most from each annuity option. Comparing retirees who chose different annuities, we find that these groups of retirees report very different levels of well-being in retirement.
Keywords: Annuity choices; Public sector pensions; Retirement income security; Financial literacy; Risk preferences
JEL Codes: G2; H55; H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Gender (J16) | Choice of Joint and Survivor Annuities (G52) |
| Race/Ethnicity (J15) | Choice of Joint and Survivor Annuities (G52) |
| Perceived Life Expectancy (J17) | Choice of Joint and Survivor Annuities (G52) |
| Spouse's Life Expectancy (D15) | Choice of Joint and Survivor Annuities (G52) |
| Health Status (I12) | Choice of Joint and Survivor Annuities (G52) |
| Long-Term Care Insurance (G52) | Choice of Joint and Survivor Annuities (G52) |
| Choice of Joint and Survivor Annuities (G52) | Retirement Wellbeing (J26) |