Behavioral Impediments to Valuing Annuities: Complexity and Choice Bracketing

Abstract This paper examines two behavioral factors that diminish people's ability to value a lifetime income stream or annuity, drawing on randomized experiment with about 4,000 adults in U.S. nationally representative sample. We find increasing the complexity of annuity choice reduces respondents' measured by difference between sell and buy values they assign annuity. When we limit narrow bracketing inducing people think first how quickly slowly spend down assets retirement, their an increases.