The Annuity Puzzle Revisited: Barriers, Behavior, and Policy Paths to Lifetime Income

Wealth decumulation decisions, or how to optimize consumption over an uncertain remaining lifespan, are among the most difficult people face. They involve intertemporal tradeoffs, uncertainty, complexity, and emotion, yet many consumers receive little formal guidance. A central challenge is securing lifetime income and avoiding outliving resources, particularly through life annuities that guarantee income for life. Standard economic models predict high demand for annuities, but in practice few individuals purchase them, a gap known as the annuity puzzle. This paper introduces annuities, examines limited adoption among consumers and plan sponsors, reviews leading explanations, and outlines approaches to increase uptake and improve decision quality.