Annuities: Whose cup of Tea? A Literature Review.

By Junhao Liu

LIterature REview Overview

Annuity and guaranteed lifetime income products provide valuable protection against the risk of outliving one’s retirement savings, yet the take-up of annuities is limited and below theoretical predictions by academic research. To shed light on this puzzle, I survey empirical studies from multiple disciplines on personal and household characteristics that influence consumer demand for annuities. I synthesize the literature in four areas: (1) demographic and economic factors, (2) rational consumer preferences, (3) behavioral impediments and the product design of annuities, and (4) financial literacy and cognitive ability in financial decision-making. Finally, I propose actionable items for the American retirement ecosystem and directions for future research.

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About the Author

Junhao Liu is a postdoctoral research associate at the University of Sydney, Australia. The views expressed in this review are those of the author and do not necessarily reflect the views of the University of Sydney.

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