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The Effect of Annuities on Longevity

Author

Listed:
  • Borja Larrain
  • Alessandro Previtero
  • Felipe Severino

Abstract

We examine how annuities affect longevity using administrative payout data on approximately 600,000 Chilean retirees from 2004 to 2022. To address selection into annuitization, we exploit the fact that annuity sales vary with recent market returns, a pattern consistent with extrapolative beliefs. We find that the decision to annuitize—instrumented by recent market returns—substantially reduces mortality at five- and ten-year horizons. Further analyses indicate that annuities reduce mortality by shielding retirees from income volatility and investment-related stress. Complementary survey evidence suggests that annuitants invest more in health and report lower disability rates.

Suggested Citation

  • Borja Larrain & Alessandro Previtero & Felipe Severino, 2026. "The Effect of Annuities on Longevity," NBER Working Papers 35082, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35082
    Note: AG EH
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G52 - Financial Economics - - Household Finance - - - Insurance
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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