TY  - JOUR
AU  - Brown,Jeffrey R.
AU  - Kling,Jeffrey R.
AU  - Mullainathan,Sendhil
AU  - Wrobel,Marian V.
TI  - Why Don't People Insure Late Life Consumption: A Framing Explanation of the Under-Annuitization Puzzle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13748
PY  - 2008
Y2  - January 2008
UR  - http://www.nber.org/papers/w13748
L1  - http://www.nber.org/papers/w13748.pdf
N1  - Author contact info:
Jeffrey Brown
Department of Finance
University of Illinois at Urbana-Champaign
515 East Gregory Drive
Champaign, IL 61820
Tel: 217/333-3322
E-Mail: brownjr@illinois.edu

Jeffrey R. Kling
Congressional Budget Office
3403 Ordway St NW
Washington, DC 20016
E-Mail: jeffrey.r.kling@gmail.com

Sendhil Mullainathan
Department of Economics
Littauer M-18
Harvard University
Cambridge, MA  02138
Tel: 617/496-2720
Fax: 617/495-7730
E-Mail: mullain@fas.harvard.edu

Marian Wrobel
Mathematica Policy Research, Inc.
955 Massachusetts Avenue, Suite 801
Cambridge, MA 02139
Tel: 617/491-7900
Fax: 617/491-8044
E-Mail: marian.wrobel@gmail.com
AB  - Rational models of risk-averse consumers have difficulty explaining limited annuity demand. We posit that consumers evaluate annuity products using a narrow "investment frame" that focuses on risk and return, rather than a "consumption frame" that considers the consequences for lifelong consumption. Under an investment frame, annuities are quite unattractive, exhibiting high risk without high returns. Survey evidence supports this hypothesis: whereas 72 percent of respondents prefer a life annuity over a savings account when the choice is framed in terms of consumption, only 21 percent of respondents prefer it when the choice is framed in terms of investment features.
ER  -