Individual Capability and Effort in Retirement Benefit Choice

38 Pages Posted: 11 Sep 2014

See all articles by Hazel Bateman

Hazel Bateman

UNSW Sydney, CEPAR

Christine Eckert

University of Technology Sydney (UTS) - School of Marketing

Fedor Iskhakov

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR)

Jordan J. Louviere

University of South Australia - Institute for Choice

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics

Susan Thorp

University of Sydney Business School; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 24, 2014

Abstract

We investigate the role of capability and effort in the management of retirement ruin. In an experimental setting, we analyze how 854 DC plan members reallocated wealth between a lifetime annuity and a phased withdrawal account when we increased the risk of exhausting the phased withdrawal account before the end of life. We find that more numerate individuals who put effort into understanding product features chose more longevity insurance at higher ruin risks. Financially literate members were more likely to show understanding of the product features, but general financial literacy did not directly improve ruin risk management. Initiatives aiming to help DC members understand income stream products at the time of the decision are warranted.

Suggested Citation

Bateman, Hazel and Eckert, Christine and Iskhakov, Fedor and Louviere, Jordan J. and Satchell, Stephen E. and Thorp, Susan, Individual Capability and Effort in Retirement Benefit Choice (July 24, 2014). UNSW Australia Business School Research Paper No. 2014ACTL07. Available at SSRN: https://ssrn.com/abstract=2494036 or http://dx.doi.org/10.2139/ssrn.2494036

Hazel Bateman (Contact Author)

UNSW Sydney, CEPAR ( email )

High Street
Sydney, NSW 2052
Australia

Christine Eckert

University of Technology Sydney (UTS) - School of Marketing ( email )

P.O. Box 123
Broadway, NSW 2007
Australia

Fedor Iskhakov

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Level 6 Central Lobby (enter via East Lobby)
Australian School of Business Building
Sydney, New South Wales NSW 2052
Australia

Jordan J. Louviere

University of South Australia - Institute for Choice ( email )

Level 13
140 Arthur Street
North Sydney, New South Wales 2060
Australia

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
44 (0)1223 335213 (Phone)
44 (0)1223 335475 (Fax)

HOME PAGE: http://www.econ.cam.ac.uk/faculty/satchell/index.h

Susan Thorp

University of Sydney Business School ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9351 6354 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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