Rational Choice with Complex Products: Consumer Valuation of Annuities
14 Pages Posted: 20 Feb 2013
This study explores consumers’ ability to accurately estimate the value of a life annuity product. Using a special experimental module from the 2008 Health and Retirement Study, higher levels of financial sophistication and numeracy showed no impact on an individual’s ability to accurately value life annuity benefits. The results suggest that rational and behavioral valuation factors have little influence on valuation. These findings are evidence of a widespread lack of understanding surrounding complex annuity products.
Keywords: annuities, financial literacy, household finance, retirement policy
Suggested Citation: Suggested Citation