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Are Cognitive Constraints a Barrier to Annuitization?

Author

Listed:
  • Jeffrey R. Brown
  • Arie Kapteyn
  • Erzo F.P. Luttmer
  • Olivia S. Mitchell

Abstract

The brief’s key findings are: *Even though retirees are increasingly responsible for deciding how to draw down their assets, few buy annuities. *Researchers have offered a host of explanations for the limited take-up, but the puzzle has never been solved. *This analysis finds that valuing annuities is hard for people, so they may only buy one if offered a very good deal. *To test this finding, alternative explanations were explored and the results were negative, strengthening the conclusion that people find annuities hard to value. *These results suggest that many individuals, on their own, may have difficulty making well-informed choices about managing their money in retirement.

Suggested Citation

  • Jeffrey R. Brown & Arie Kapteyn & Erzo F.P. Luttmer & Olivia S. Mitchell, 2015. "Are Cognitive Constraints a Barrier to Annuitization?," Issues in Brief ib2015-6, Center for Retirement Research.
    • Handle: RePEc:crr:issbrf:ib2015-6
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    File URL: http://crr.bc.edu/briefs/are-cognitive-constraints-a-barrier-to-annuitization/
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