Framing Lifetime Income

Jeffrey R Brown; Jeffrey R Kling; Sendhil Mullainathan; Marian V Wrobel

doi:10.3386/w19063

Framing Lifetime Income

Jeffrey R Brown, Jeffrey R Kling, Sendhil Mullainathan, Marian V Wrobel

Research output: Contribution to journal › Article › peer-review

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.

Original language	English (US)
Pages (from-to)	27-37
Journal	National Bureau of Economic Research Working Paper Series
Volume	1
Issue number	1
DOIs	https://doi.org/10.3386/w19063
State	Published - May 2013

Online availability

10.3386/w19063

Library availability

Discover UIUC Full Text

Cite this

@article{58a7e3df2524414abfd03ede29748fc1,

title = "Framing Lifetime Income",

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.",

author = "Brown, {Jeffrey R} and Kling, {Jeffrey R} and Sendhil Mullainathan and Wrobel, {Marian V}",

note = "Author contact info: Jeffrey R. Brown Gies College of Business University of Illinois at Urbana-Champaign 1206 S. Sixth Street Champaign, IL 61820 Tel: 217/333-3322 E-Mail: [email protected] Jeffrey R. Kling Congressional Budget Office 3403 Ordway St NW Washington, DC 20016 E-Mail: [email protected] Sendhil Mullainathan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2353 E-Mail: [email protected] Marian Wrobel Health Policy Commission Two Boylston Street, Sixth Floor Boston, MA 02116 Tel: 617-979-1411 E-Mail: [email protected]",

year = "2013",

month = may,

doi = "10.3386/w19063",

language = "English (US)",

volume = "1",

pages = "27--37",

journal = "National Bureau of Economic Research Working Paper Series",

number = "1",

}

TY - JOUR

T1 - Framing Lifetime Income

AU - Brown, Jeffrey R

AU - Kling, Jeffrey R

AU - Mullainathan, Sendhil

AU - Wrobel, Marian V

N1 - Author contact info: Jeffrey R. Brown Gies College of Business University of Illinois at Urbana-Champaign 1206 S. Sixth Street Champaign, IL 61820 Tel: 217/333-3322 E-Mail: [email protected] Jeffrey R. Kling Congressional Budget Office 3403 Ordway St NW Washington, DC 20016 E-Mail: [email protected] Sendhil Mullainathan Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-2353 E-Mail: [email protected] Marian Wrobel Health Policy Commission Two Boylston Street, Sixth Floor Boston, MA 02116 Tel: 617-979-1411 E-Mail: [email protected]

PY - 2013/5

Y1 - 2013/5

N2 - 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.

AB - 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.

U2 - 10.3386/w19063

DO - 10.3386/w19063

M3 - Article

VL - 1

SP - 27

EP - 37

JO - National Bureau of Economic Research Working Paper Series

JF - National Bureau of Economic Research Working Paper Series

IS - 1

ER -

Framing Lifetime Income

Abstract

Online availability

Library availability

Fingerprint

Cite this