Individual Capability and Effort in Retirement Benefit Choice

30 Pages Posted: 5 Jun 2018

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 Satchell

The University of Sydney

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: June 2018

Abstract

We investigate the role of individual capability and effort in the management of retirement ruin. In an experimental setting, we analyze how 854 defined contribution (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 and Thorp, Susan, Individual Capability and Effort in Retirement Benefit Choice (June 2018). Journal of Risk and Insurance, Vol. 85, Issue 2, pp. 483-512, 2018. Available at SSRN: https://ssrn.com/abstract=3189170 or http://dx.doi.org/10.1111/jori.12162

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 Satchell

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

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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