Wharton Pension Research Council Working Papers

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Working Paper

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Objective life expectancy and subjective survival pessimism (defined as the difference between objective and subjective life expectancy) may both affect the demand for annuities. The question this project answers is: how do these two explanations contribute to annuitization decisions in practice? To explore this question, the analysis estimates regression models that include objective life expectancy, subjective survival pessimism, and other characteristics that are linked to annuitization decisions. The results show that, as one would expect, individuals with higher objective life expectancy are more likely to buy an annuity. Similarly, less pessimistic individuals are also more likely to buy an annuity. A one-year rise in objective life expectancy increases the probability of buying an annuity product by 0.18 percent, which is 7.7 times larger than a one-year decline in pessimism.


life expectancy; survival pessimism; annuities

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Copyright/Permission Statement

Any opinions expressed herein are those of the authors, and do not necessarily represent the views of TIAA, the TIAA Institute, or Boston College. © 2022, Karolos Arapakis and Gal Wettstein. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. All findings, interpretations, and conclusions of this paper represent the views of the authors and does not represent official views of the above-named institutions. © 2023 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The Center for Retirement Research at Boston College gratefully acknowledges the TIAA Institute for supporting this research.

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Economics Commons



Date Posted: 25 May 2023