An Annuity People Might Actually Buy

Posted: 10 Mar 2010

See all articles by Anthony Webb

Anthony Webb

Boston College - Center for Retirement Research

Guan Gong

affiliation not provided to SSRN

Wei Sun

Renmin University of China - Hanqing Advanced Institute of Economics and Finance and School of Finance

Date Written: July 2007

Abstract

Immediate annuities provide insurance against outliving one's wealth. Previous research has shown that this insurance ought to be valuable to risk-averse households facing an uncertain lifespan. But rates of voluntary annuitization remain extremely low. Many explanations have been offered for retired households' reluctance to annuitize. One prominent explanation is that annuities suffer from a considerable degree of actuarial unfairness. That is, for the average household, the expected value of the income, discounted by a rate of interest and annual survival probabilities, is considerably less than the premium paid. But it seems likely that households are also influenced by a reluctance to give up access to their life savings...

Suggested Citation

Webb, Anthony and Gong, Guan and Sun, Wei, An Annuity People Might Actually Buy (July 2007). Available at SSRN: https://ssrn.com/abstract=1116389

Anthony Webb (Contact Author)

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Guan Gong

affiliation not provided to SSRN ( email )

Wei Sun

Renmin University of China - Hanqing Advanced Institute of Economics and Finance and School of Finance ( email )

59 Zhongguancun Street
Beijing, Beijing 100872
China

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