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 current survey of individuals with investable property over $100,000 that included a randomized management trial module eliciting people’ valuations for a easy quick 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 key end result means that half of these surveyed wish to annuitize at prevailing market annuity costs, a a lot increased share than the 12 % of this group who really 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 property over $100,000 must be even increased than 50 %, additional suggesting that the wedge between the 50 % that wish to annuitize and the 12 % that do shouldn’t be as a result of preferences or financial circumstances. The outcomes discover assist for “channel elements” – difficulties related to really buying an annuity – as a significant obstacle to annuitization.
