Individual Capability and Effort in Retirement Benefit Choice
38 Pages Posted: 11 Sep 2014
There are 2 versions of this paper
Individual Capability and Effort in Retirement Benefit Choice
Individual Capability and Effort in Retirement Benefit Choice
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: Suggested Citation
Fedor Iskhakov
University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )
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Financial Research Network (FIRN)
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Centre for International Finance and Regulation (CIFR) ( email )
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