NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Framing Lifetime Income

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

NBER Working Paper No. 19063
Issued in May 2013
NBER Program(s):   AG

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.

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Document Object Identifier (DOI): 10.3386/w19063

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