We develop an equilibrium theory of employer-sponsored retirement plan design using a behavioral contract theory approach. The operation of the labor market results in retirement plans that generally cater to, rather than correct, workers' mistakes. Our theory provides new explanations for a...

This discussion paper reviews the needs of Australian retirees for financial products and services especially annuity products and financial advice; how they are currently met in Australia; briefly evaluate some alternatives; and identify obstacles to greater annuitisation. These obstacles include...

We determine the optimal lifecycle purchasing strategy for deferred income annuities (DIAs), which are distinct from single-premium income annuities (SPIAs) for an individual who wishes to maximize the expected utility of her annuity income at a fixed time in the future. In contrast to the...

Shankar (2009) proposes a new investment strategy for retirees that bundles Treasury Inflation Protected Securities with a deferred annuity to guarantee real annual withdrawal rates of 5% or more with no risk of financial ruin. This strategy addresses three problems that retirees face: longevity...

Most defined contribution pension plans pay benefits as lump sums, yet the US Treasury has recently encouraged firms to protect retirees from outliving their assets by converting a portion of their plan balances into longevity income annuities (LIA). These are deferred annuities which initiate...

PurposeDeferred annuities, which offer longevity insurance with relatively low premiums, are a potential payout option in defined contribution (DC) pension plans in Japan. This study aims to measure individual preferences for these annuities.Design/methodology/approachThis study conducts stated...

This paper investigates retirees' optimal purchases of fixed and variable longevity income annuities using their defined contribution (DC) plan assets and given their expected Social Security benefits. As an alternative, we also evaluate using plan assets to boost Social Security benefits...

Economists have long been puzzled by the low demand for life annuities. To shed new light on this puzzle, we study payout choices in the Oregon Public Employees Retirement System, where each retiree must choose between a lump sum and a life annuity. Notably, the average life annuity we study is...

We analyze the long-standing “annuity puzzle” through the lens of behavioral economics. We provide novel evidence that lessens the extent of the puzzle and shed some additional light on the real drivers of the decision to annuitize. Last, we discuss the policy implications of our findings