The Effect of Annuities on Longevity

We examine how annuities affect longevity using administrative payout data on approximately 600,000 Chilean retirees from 2004 to 2022. To address selection into annuitization, we exploit the fact that annuity sales vary with recent market returns, a pattern consistent with extrapolative beliefs. We find that the decision to annuitize—instrumented by recent market returns—substantially reduces mortality at five- and ten-year horizons. Further analyses indicate that annuities reduce mortality by shielding retirees from income volatility and investment-related stress. Complementary survey evidence suggests that annuitants invest more in health and report lower disability rates.