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Bequest Motives and the Annuity Puzzle

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  • Lee Lockwood

    (University of Chicago)

Abstract

Few retirees annuitize any wealth, a fact that has so far defied explanation within the standard framework of forward-looking, expected utility-maximizing agents. Bequest motives seem a natural explanation. Yet the prevailing view is that people with plausible bequest motives should annuitize part of their wealth, and thus that bequest motives cannot explain why most people do not annuitize any wealth. I show, however, that people with plausible bequest motives are likely to be better off not annuitizing any wealth at available rates. The evidence suggests that bequest motives play a central role in limiting the demand for annuities. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 15 (2012)
Issue (Month): 2 (April)
Pages: 226-243

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Handle: RePEc:red:issued:10-110

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Related research

Keywords: Annuities; Life-cycle model; Bequest motives;

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References

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  1. What Do People Have Against Retirement Income?
    by Justin Fox in HBR Blog Network on 2014-02-25 16:00:49
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