The Pivotal Role of Fairness: Which Consumers Like Annuities?

Posted: 12 Nov 2019

See all articles by Suzanne B. Shu

Suzanne B. Shu

University of California, Los Angeles - Anderson School of Management

Robert Zeithammer

University of California, Los Angeles (UCLA) - Anderson School of Management

John W. Payne

Duke University - Marketing

Multiple version iconThere are 2 versions of this paper

Date Written: December 7, 2018

Abstract

Decumulation of wealth in retirement is a difficult task, requiring tradeoffs between longevity risks and immediate consumption needs. Economists have long argued that life annuities can be a valuable part of decumulation and that most retirees should annuitize, and yet actual market demand is quite low–the so‐called “annuity puzzle.” We analyze data from two studies to understand how measurable individual differences predict interest in annuities. In our data, a relatively high percentage of respondents dislike all annuities; demographic measures are not predictive of which individuals never choose annuities, and individual factors (such as beneficiaries) favored by economic models have small or even opposite effects. We find that the strongest individual differences predictive of liking of annuities are the respondent's perception of product fairness. We discuss implications of our findings for financial planners hoping to help customers with their decumulation challenges.

Full Text Available Here: https://doi.org/10.1002/cfp2.1019

Suggested Citation

Shu, Suzanne B. and Zeithammer, Robert and Payne, John W., The Pivotal Role of Fairness: Which Consumers Like Annuities? (December 7, 2018). Financial Planning Review, Vol. 1, Issue 3-4, September-December 2018, Available at SSRN: https://ssrn.com/abstract=3485663

Suzanne B. Shu (Contact Author)

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Robert Zeithammer

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

John W. Payne

Duke University - Marketing ( email )

United States

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