What Makes Annuitization More Appealing?

John  Beshears; James J. Choi; David  Laibson; Brigitte C. Madrian; Stephen P. Zeldes

Article | Journal of Public Economics | August 2014

What Makes Annuitization More Appealing?

by John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian and Stephen P. Zeldes

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.

Keywords: annuity; pension; retirement income; framing; Annuities; Retirement;

Format: Print

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Citation:

Beshears, John, James J. Choi, David Laibson, Brigitte C. Madrian, and Stephen P. Zeldes. "What Makes Annuitization More Appealing?" Special Issue on NBER Pensions. Journal of Public Economics 116 (August 2014): 2–16.

In 2016, members of the U.S. Women's National Soccer Team (WNT) took steps to fight for equal pay relative to the U.S. Men's National Soccer Team. Their legal representative declared that the memorandum of understanding governing the relationship between the players and the U.S. Soccer Federation (USSF) was terminable at will. If a court agreed with this position, the players could threaten to strike in advance of the upcoming Olympics. In addition, five of the top WNT players filed a wage-discrimination complaint against the USSF with the Equal Employment Opportunity Commission. This case describes the history of the WNT and the USSF leading up to these events.

In 2016, members of the U.S. Women's National Soccer Team (WNT) took steps to fight for equal pay relative to the U.S. Men's National Soccer Team. Their legal representative declared that the memorandum of understanding governing the relationship between the players and the U.S. Soccer Federation (USSF) was terminable at will. If a court agreed with this position, the players could threaten to strike in advance of the upcoming Olympics. In addition, five of the top WNT players filed a wage-discrimination complaint against the USSF with the Equal Employment Opportunity Commission. This case describes the events following from the actions of the WNT players.

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What Makes Annuitization More Appealing?

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