Why Don't People Insure Late-Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle

Why Don't People Insure Late Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle

Nber Working Paper Series Why Don't People Insure Late Life Consumption: a Framing Explanation of the Under-annuitization Puzzle

Rational models of risk-averse consumers have difficulty explaining limited annuity demand. We posit that consumers evaluate annuity products using a narrow "investment frame" that focuses on risk and return, rather than a "consumption frame" that considers the consequences for lifelong consumption. Under an investment frame, annuities are quite unattractive, exhibiting high risk without high r...

The Retirement Security Project Why Don’t People Choose Annuities? A Framing Explanation

Accordi ng to standard economic models, a risk-averse consumer who does not know how long he will live should place a high value on life annuities that provide guaranteed income for life. Yet numerous studies show that few consumers voluntarily annuitize their retirement savings. Rather than attempting to rationalize the lack of annuity demand, this paper explores the idea that aversion to annu...

Neglecting Disaster: Why Don’t People Insure Against Large Losses?

This paper provides a theoretical explanation for the common observation that people often fail to purchase insurance against low-probability high-loss events even when it is offered at favorable premiums. We hypothesize that individuals maximize expected utility but face an explicit or implicit cost to discovering the true probability of rare events. This cost constitutes a threshold that may ...

a study on construction of iranian life tables: the case study of modified brass logit system

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