Rational Choice with Complex Products: Consumer Valuation of Annuities

14 Pages Posted: 20 Feb 2013

See all articles by Chris Browning

Chris Browning

East Central University - Accounting Department

Michael S. Finke

The American College

Sandra J. Huston

Texas Tech University

Abstract

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

Browning, Chris and Finke, Michael S. and Huston, Sandra J., Rational Choice with Complex Products: Consumer Valuation of Annuities. Journal of Financial Counseling and Planning, Vol. 23, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2220826

Chris Browning (Contact Author)

East Central University - Accounting Department ( email )

Oklahoma
United States

Michael S. Finke

The American College ( email )

Bryn Mawr, PA 19010
United States

Sandra J. Huston

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

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