Insight: The Annuitization Decision and Framing

By Jason Fichtner

Insight Overview


The authors’ research findings suggest the following insights and ideas: (1) Annuity demand could be increased if finance professionals were to use different framing techniques—that is, ways of structuring their conversations with retirement savers about annuities. Specifically, they should adopt a frame that focuses on how money from an annuity will ultimately be spent (consumption), rather than using a frame that focuses on the risk and return characteristics of an annuity (investment). (2) Annuity demand could be increased by presenting consumers with more partial annuitization options, instead of forcing them to choose between receiving 0% or 100% of their retirement benefit in the form of an annuity. (3) Annuity demand could be increased by testing further customization of annuities, such as by offering an annual bonus payment, which would be financed by lowering the payment made in the other months throughout the year. Finally, (4) some frames have no impact on annuity demand, such as explaining that the annuity being offered is a better deal than what could be purchased on the open market.

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About the author

Jason J. Fichtner is Chief Economist at the Bipartisan Policy Center and Senior Fellow at the Retirement Income Institute.

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