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Publications
Publications
  • August 2014
  • Article
  • Journal of Public Economics

What Makes Annuitization More Appealing?

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

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.
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About The Author

John Beshears

Negotiation, Organizations & Markets
→More Publications

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    Present Bias Causes and Then Dissipates Auto-enrollment Savings Effects

    By: John Beshears, James J. Choi, David Laibson and Peter Maxted
More from the Authors
  • Automating Short-Term Payroll Savings: Initial Evidence from a Large U.K. Experiment By: Sarah Holmes Berk, John Beshears, James J. Choi and David Laibson
  • How to Choose a Default By: John Beshears, Richard T. Mason and Shlomo Benartzi
  • Present Bias Causes and Then Dissipates Auto-enrollment Savings Effects By: John Beshears, James J. Choi, David Laibson and Peter Maxted
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