Refundable income annuities (IA), such as cash-refund and instalment-refund, differ in material ways from the life-only version beloved by economists. In addition to lifetime they guarantee annuitant or beneficiary will receive their money back albeit slowly over time. We document that refundable IAs now represent majority of sales U.S., yet are mostly ignored insurance pension And, although pr...

Longevity risk has become a major challenge for governments, individuals, and annuity providers in most countries, and especially its aggregate form, i.e. the risk of unsystematic changes to general mortality patterns, bears a large potential for accumulative losses for insurers. As obvious risk management tools such as (re)insurance or hedging are less suited to manage an annuity provider’s ex...

As the U.S. population ages, the growing retiree-worker ratio increases the burden of public retirement systems. Is it efficient to maintain a defined-benefit social security system? Should PAYGO benefits be reduced and private retirement savings be encouraged? The paper examines these questions in a neoclassical growth model with overlapping generations and demographic uncertainty. In case of ...

We propose mortality salience – increased accessibility of death-related thoughts – as one previously unexplored explanation for the annuity puzzle, the low rate at which retirees buy annuities even though economists recommend annuities as an optimal decision. Across four studies we show that mortality salience decreases how likely individuals are to put savings into an annuity. By forcing cons...

We compare individual survival curves constructed from objective (actual mortality) and elicited subjective information (probability of survival to a given target age). We develop a methodology to estimate jointly subjective and objective individual survival curves accounting for rounding on subjective reports of perceived survival. We make use of the long follow-up period in the Health and Ret...

This paper studies the effects of health shocks on the demand for health insurance and annuities, along with precautionary saving in a dynamic life-cycle model. I argue that when the health shock can simultaneously increase health expenses and reduce longevity, rational agents would neither fully insure their uncertain health expenses nor fully annuitize their wealth because the correlation bet...