Framing Lifetime Income

24 Pages Posted: 8 Aug 2019

See all articles by Jeffrey R. Brown

Jeffrey R. Brown

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); University of Illinois College of Law; University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA); University of Illinois at Urbana-Champaign - Department of Economics

Jeffrey R. Kling

Government of the United States of America - Congressional Budget Office (CBO); National Bureau of Economic Research (NBER)

Sendhil Mullainathan

University of Chicago

Marian Wrobel

Harvard University - Institute for Quantitative Social Science

Multiple version iconThere are 2 versions of this paper

Date Written: May 2013

Abstract

We provide evidence that individuals optimize imperfectly when making annuity decisions, and this result is not driven by loss aversion. Life annuities are more attractive when presented in a consumption frame than in an investment frame. Highlighting the purchase price in the consumption frame does not alter this result. The level of habitual spending has little interaction with preferences for annuities in the consumption frame. In an investment frame, consumers prefer annuities with principal guarantees; this result is similar for guarantee amounts below, at, and above the purchase price. We discuss implications for the retirement services industry and its regulators.

Suggested Citation

Brown, Jeffrey R. and Kling, Jeffrey and Mullainathan, Sendhil and Wrobel, Marian, Framing Lifetime Income (May 2013). NBER Working Paper No. w19063, Available at SSRN: https://ssrn.com/abstract=3431847

Jeffrey R. Brown (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

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National Bureau of Economic Research (NBER) ( email )

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University of Illinois College of Law ( email )

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University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA) ( email )

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University of Illinois at Urbana-Champaign - Department of Economics ( email )

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Jeffrey Kling

Government of the United States of America - Congressional Budget Office (CBO) ( email )

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National Bureau of Economic Research (NBER)

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Sendhil Mullainathan

University of Chicago ( email )

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Chicago, IL 60637
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Marian Wrobel

Harvard University - Institute for Quantitative Social Science ( email )

1737 Cambridge St.
Cambridge, MA 02138
United States

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