Although rational models of risk-averse consumers have difficulty explaining limited annuity demand, we have shown in previous work that re-framing the decision in consumption terms rather than investment terms significantly increases the relative attractiveness of life annuities. In this paper we test the relative effectiveness of our two framing contexts when different reference points are in...

Although rational models of risk-averse consumers have difficulty explaining limited annuity demand, we have shown in previous work that re-framing the decision in consumption terms rather than investment terms significantly increases the relative attractiveness of life annuities. In this paper we test the relative effectiveness of our two framing contexts when different reference points are in...

We study adverse selection using data from an 1808 Act of British Parliament that effectively opened a market for life annuities. Our analysis indicates significant selection effects. The evidence for adverse selection is strongest for a sub-sample of annuitants whose annuities were purchased by profit-seeking speculators, a sub-sample in which “advantageous selection” resulting from multi-dime...

This paper describes how differences in health status at retirement can influence the decision to purchase a life annuity. We extend previous research on annuitization decisions by incorporating the effect of health differentials via differences in survival throughout the latter portion of life. Next, we consider how precautionary savings motivated by uncertain out-of-pocket medical expenses in...

This paper analyzes an individual’s post retirement longevity risk management strategy allowing for systematic longevity risk, recent product innovations, and product loadings. A complete-markets discrete state model and multi-period simulations of portfolio strategies are used to assess individual longevity insurance product portfolios with differing levels of systematic and idiosyncratic long...

The market for private life annuities is characterised by adverse selection, that is, contracts offer lower than fair payoffs to individuals with low life expectancy. Moreover, life expectancy and income have been found to be positively correlated. The paper shows that a linear tax on annuity payoffs, which raises more revenues from long-living individuals than from short-living, represents an ...

Public health insurance and public annuity programs account for half of federal spending, and have traditionally been viewed as unconnected. We develop an economic framework for valuing improvements in health and apply it to exploring the relationship between annuity programs and the value of life. Incorporating incomplete annuitization into the conventional economic theory of life-extension ge...