Behavioral Impediments to Valuing Annuities: Evidence on the Effects of Complexity and Choice Bracketing
By Jeffrey R. Brown, Arie Kapteyn, Erzo F.P. Luttmer, Olivia S. Mitchell & Anya Samek This paper examines two behavioral factors that diminish people’s ability to value a lifetime income stream or annuity, drawing on a survey of about 4,000 adults in a U.S. nationally representative sample. Our first main finding is that experimentally increasing the complexity of the annuity choice reduces respondents’ ability to value the annuity. We measure lack of ability to value an annuity by the difference...