Understanding the Annuity Puzzle: Why Retirees Often Avoid Annuities
Economic theory suggests that retirees should protect themselves against outliving their assets by purchasing life annuities. In return for a lump sum at purchase these financial products provide a guaranteed income stream for life, effectively insuring against the risk of depleting one’s savings—a concern known as longevity risk. Despite these theoretical benefits, we observe that […]
Are Annuities (SPIAs) Okay When Interest Rates are Low?
Readers of my last blog entry, Annuities and Delayed Social Security, provided many valuable comments, prompting me to now write a follow-up post. Most of the discussion centered on a chart showing the relationship between annuity payout rates and interest rates. That chart was actually a last minute addition, as I saw the picture on […]
