Summary

A longstanding puzzle within the economics of insurance coverage, family finance, and public coverage is why so few people annuitize their wealth.  This paper describes outcomes from a latest survey of individuals with investable belongings over $100,000 that included a randomized management trial module eliciting people’ valuations for a easy fast annuity, in addition to whether or not they’re prepared to pay extra for annuities with survivor advantages or with a liquidity clause permitting them to withdraw the remaining premium.  The main consequence means that half of these surveyed wish to annuitize at prevailing market annuity costs, a a lot increased share than the 12 p.c of this group who truly do purchase annuities.  By way of annuity options, people are unwilling to pay extra for a loss of life profit or a liquidity choice, underscoring that it isn’t supposedly aversive options of annuities stopping extra widespread adoption.  Furthermore, the evaluation calibrates a lifecycle mannequin utilizing the Well being and Retirement Research.  With affordable desire parameters, the mannequin means that annuitization charges for people with investable belongings over $100,000 ought to be even increased than 50 p.c, additional suggesting that the wedge between the 50 p.c that wish to annuitize and the 12 p.c that do will not be as a consequence of preferences or financial circumstances.  The outcomes discover assist for “channel components” – difficulties related to truly buying an annuity – as a significant obstacle to annuitization.