By Hallie Davis, Andrea Hasler, and Annamaria Lusardi

Research Overview

The annuity take-up rate is lower than economic theory predicts.1 Using data from the 2018 National Financial Capability Study, we conduct an empirical analysis of individuals in the retirement-planning phase of the life cycle (ages 40–61) and individuals of retirement age (age 62 and over). We examine individuals’ balance sheets, financial situations, and retirement planning steps to understand the barriers to annuity ownership, and we identify the financial and sociodemographic factors that contribute to annuity ownership. We find that debt obligations, lack of access to liquidity, and low financial literacy are all likely barriers to annuity ownership; the annuity owners in our sample are more likely than the non-owners to have access to liquidity and to report higher levels of financial satisfaction. Results indicate that access to liquidity and to professional investment management are positively associated with annuity ownership. Furthermore, financial literacy could lead to improved take-up rates through improved access to liquidity. These findings lead us to conclude that efforts to improve individuals’ financial literacy levels may lead to enhanced retirement outcomes.

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About the Authors

Hallie Davis is a Senior Research Associate at the Global Financial Literacy Excellence Center (GFLEC). Her expertise is in financial education, where she conducts research, builds initiatives, and develops resources. She leads GFLEC’s financial education initiatives. She holds a master of arts degree in international economics and finance from Johns Hopkins University, School of Advanced International Studies. Her master’s dissertation was on stock market participation and investment decision-making.

Andrea Hasler is Assistant Research Professor in financial literacy at GFLEC. She leads the team of researchers working on financial literacy and capability, and develops analyses for educational and policy initiatives. Hasler has recently worked on projects focused on financial literacy levels of the young, women, entrepreneurs, investors, and historically underrepresented communities in the United States and around the world. She holds a doctorate in finance as well as master of science and bachelor of arts degrees in business and economics from the University of Basel. During her work on her doctorate, she spent two years at the New York University Stern School of Business conducting research on household saving and financial decision-making. She also has been a lecturer at the University of Basel for the past seven years. Her professional experience includes the development of an online advanced studies course in financial market theory and work as an analyst conducting global equity market research.

Annamaria Lusardi is the University Professor of Economics and Accountancy at The George Washington University, and is the founder and academic director of GFLEC. She has published extensively and in many leading economics journals, and is the recipient of several prestigious awards. Lusardi also directs the Financial Education Committee in Italy, and is in charge of implementing a national strategy for financial literacy. In addition, she chairs the OECD’s International Network for Financial Education Research Committee. She has taught at Dartmouth College, Princeton University, the University of Chicago Harris School of Public Policy and Booth School of Business, and Columbia Business School. She also was a visiting scholar at Harvard Business School. She earned her bachelor of arts degree from Bocconi University in Milan and her doctorate from Princeton University.

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