- Why Don't People Insure Late Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle
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- by Mullainathan, Sendhil; Brown, Jeffrey R.; Kling, Jeffrey R.; Wrobel, Marian V.
- According to standard economic models, a risk-averse consumer who faces uncertainty about
length-of-life 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. As
public and private pension systems around the world continue the ongoing shift from traditional
defined benefit plans, which typically pay benefits for life, to defined contribution structures
which rarely require annuitization, retirees find themselves increasingly exposed to longevity
risk—the risk of being unable to sustain their consumption should they live longer than average.
- Publication Type: Conference Paper
- Published Date: January 5, 2008
- Field of Interest: Global Issues
- Mullainathan, Sendhil, Jeffrey R. Brown, Jeffrey R. Kling, and Marian V. Wrobel. "Why Don't People Insure Late Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle." January 2008.
- Presented at the American Economic Association, January 5, 2008.