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The Annuity Puzzle and Negative Framing


  • Julie R. Agnew
  • Lisa R. Anderson
  • Jeffrey R. Gerlach
  • Lisa R. Szykman


For years, researchers have been puzzled by why so few people purchase fixed, immediate, lifetime annuities for their retirement portfolios. Rational theories have been proposed, but none can fully explain the small size of the actual market. Very recently, academics have turned their attention to possible psychological reasons for the low demand. Interestingly, despite the well-established role psychology plays in other important retirement decisions — for example, 401(k) participation — the behavioral finance aspects of the retirement distribution phase have been largely understudied. In addition, finance researchers are realizing how much can be learned from the established field of marketing, where the role of psychological biases in all types of decisionmaking has been long understood. This brief discusses how marketing, and in particular the framing of the message, can affect a purchaser’s decision to buy an annuity. This decision is becoming increasingly important given the shift to 401(k) plans, as individuals will need to determine how best to manage their accumulated nest egg in retirement.

Suggested Citation

  • Julie R. Agnew & Lisa R. Anderson & Jeffrey R. Gerlach & Lisa R. Szykman, 2008. "The Annuity Puzzle and Negative Framing," Issues in Brief ib2008-8-10, Center for Retirement Research, revised Jul 2008.
  • Handle: RePEc:crr:issbrf:ib2008-8-10

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