Nber Working Paper Series 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

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...

Simulation Analysis of the Decision to Annuitize Pension Balances∗

Prior studies of life annuities that use classical dynamic programming methods to solve for annuity decisions find large gains from annuitization. The fact that few people actually buy annuities leads to an “annuity puzzle.” An alternative method of analysis, which uses concepts from approximate dynamic programming and samples of life histories from a pension simulation model, is shown to produ...

Some Answers to The Retirement-Consumption Puzzle

This product is part of the RAND Labor and Population working paper series. RAND working papers are intended to share researchers' latest findings and to solicit informal peer review. They have been approved for circulation by RAND Labor and Population but have not been formally edited or peer reviewed. Unless otherwise indicated, working papers can be quoted and cited without permission of the...

Nber Working Paper Series Intertemporal Consumption Choices, Transaction Costs and Limited Participation to Financial Markets: Reconciling Data and Theory

This paper builds a unifying framework that, within the theory of intertemporal consumption choices, brings together the limited participation -based explanation of the poor empirical performance of the C-CAPM and the transaction costs-based explanation of incomplete portfolios. Using the implications of the consumption model and observed household consumption and portfolio choices, we identify...