Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



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. By experimentally varying the degree of complexity, we provide the first causal evidence that increasing the complexity of the annuity choice reduces respondents’ ability to value the annuity, measured by the difference between the sell and buy values people assign to the annuity. We also find that people’s ability to value an annuity increases when we experimentally induce them to think jointly about the annuitization decision as well as how quickly or slowly to spend down assets in retirement. Accordingly, we conclude that narrow choice bracketing is an impediment to annuitization, yet this impediment can be mitigated with a relatively straightforward intervention.


This paper was funded as a pilot project as part of a Roybal grant awarded to the University of Southern California, entitled “Roybal Center for Health Decision Making and Financial Independence in Old Age” (5P30AG024962-12). We are also grateful for support provided by the Pension Research Council/Boettner Center at the Wharton School of the University of Pennsylvania. The project described in this paper relies on data from survey(s) administered by the Understanding America Study (UAS) which is maintained by the Center for Economic and Social Research (CESR) at the University of Southern California.


pension, annuity, retirement income, Social Security, cognition, behavioral economics

JEL Code

D14, D91, G11, H55

Working Paper Number



Brown is a Trustee of TIAA and has served as a speaker, author, or consultant for a number of financial services organizations, some of which sell annuities and other retirement income products. Mitchell is a Trustee of the Wells Fargo Advantage Funds and has received research support from the TIAA Institute.

Copyright/Permission Statement

The opinions and conclusions expressed herein are solely those of the authors and do not represent the opinions or policy of any institution with which the authors are affiliated nor of USC, CESR or the UAS. © Brown, Kapteyn, Luttmer, Mitchell, and Samek.


The authors thank Peter Choi and Andre Gray for excellent research assistance. We are grateful for helpful comments from Alan Gustman and multiple seminar audiences.



Date Posted: 18 March 2019