Insight: The Annuity Puzzle and the Role of Pension Plan Structure and Decision Framing
By Jason Fichtner
Insight Overview
IDEAS IN THIS INSIGHT YOU CAN PUT INTO ACTION
The authors’ research findings suggest the following insights: (1) Low annuitization rates might be explained by pension plan structure design (i.e., a plan might require a survey participant to take a retirement benefit in the form of a lump-sum payment if the individual has an account balance below a certain threshold), rather than consumer preferences. (2) The framing of the annuitization decision for retirees might impact their decisions, with a consumption frame promoting annuitization and an investment frame discouraging annuitization.
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About the Author
Jason J. Fichtner is Chief Economist at the Bipartisan Policy Center and Senior Fellow at the Retirement Income Institute.