|Title||The Annuity Puzzle Gets Bigger|
|Year of Publication||2003|
|Institution||Center for Retirement Research at Boston College|
|Keywords||Healthcare, Net Worth and Assets|
Economic theory predicts that the gains from annuitization are substantial, but annuities are rare in practice. Who buys private annuities? Most of the literature concentrates on standard economic considerations, like preferences and prices, which fail to explain much of the variation in the propensity to annuitize. I add to this approach in two ways, first by exploring whether growing up in a rich family can make someone more patient and, therefore, more prone to annuitize. Second, I draw from recent literature in psychology on the problem of overconfidence , and argue that it could apply to someone s estimation of his or her life expectancy and hence to his or her propensity to annuitize. I find that appealing to these kinds of explanations does little to resolve the annuity puzzle.
The research reported herein was supported by the Center for Retirement Research at Boston College pursuant to a grant from the U.S. Social Security Administration funded as part of the Retirement Research Consortium.
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