Advanced Search
MyIDEAS: Login

How Do Retirees Value Life Annuities? Evidence from Public Employees

Contents:

Author Info

  • John Chalmers
  • Jonathan Reuter

Abstract

Because life annuities can increase the level and decrease the volatility of lifetime consumption, economists have long been puzzled by the low demand for life annuities. One potential rational explanation is that adverse selection drives up life annuity prices, which drives down demand. We study the choice between life annuities and lump sums made by 32,000 retiring public employees. These unique data allow us to extend the existing literature by exploiting economically significant cross-sectional and time-series variation in life annuity pricing. We find little evidence that retiree demand for life annuities rises when life annuity prices fall. We find strong evidence that demand responds to salient variation in individual characteristics, such as health, and to measures of investor sentiment, such as recent equity returns. The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1093/rfs/hhs057
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Society for Financial Studies in its journal The Review of Financial Studies.

Volume (Year): 25 (2012)
Issue (Month): 8 ()
Pages: 2601-2634

as in new window
Handle: RePEc:oup:rfinst:v:25:y:2012:i:8:p:2601-2634

Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Fax: 919-677-1714
Email:
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC

Order Information:
Web: http://www4.oup.co.uk/revfin/subinfo/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
  2. Andreas Fuster & Benjamin Hebert & David Laibson, 2011. "Natural Expectations, Macroeconomic Dynamics, and Asset Pricing," NBER Working Papers 17301, National Bureau of Economic Research, Inc.
  3. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2011. "Behavioral Economics Perspectives on Public Sector Pension Plans," NBER Working Papers 16728, National Bureau of Economic Research, Inc.
  4. John Beshears & James Choi & David Laibson & Brigitte Madrian & Stephen P. Zeldes, 2012. "What Makes Annuitization More Appealing?," NBER Chapters, in: Retirement Benefits for State and Local Employees: Designing Pension Plans for the Twenty-First Century National Bureau of Economic Research, Inc.
  5. John Chalmers & Woodrow T. Johnson & Jonathan Reuter, 2012. "The Effect of Pension Design on Employer Costs and Employee Retirement Choices: Evidence from Oregon," NBER Working Papers 18517, National Bureau of Economic Research, Inc.
  6. Andreas Fuster & David Laibson & Brock Mendel, 2010. "Natural Expectations and Macroeconomic Fluctuations," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 67-84, Fall.
  7. Robert L. Clark & Melinda S. Morrill & David Vanderweide, 2012. "Defined Benefit Pension Plan Distribution Decisions by Public Sector Employees," NBER Working Papers 18488, National Bureau of Economic Research, Inc.
  8. Shlomo Benartzi & Alessandro Previtero & Richard H. Thaler, 2011. "Annuitization Puzzles," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 143-64, Fall.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:25:y:2012:i:8:p:2601-2634. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.