Over the past few years, economists have expended a lot of time and energy attempting to explain what they call “the annuity puzzle.” The puzzle is this: A guaranteed lifetime income is a valuable thing (especially if it comes with regular cost-of-living adjustments), and people who receive one through a traditional state or corporate pension are generally very happy with it. So why is it that those with the self-directed “defined contribution” retirement plans that have become standard in the U.S. — 401(k)s, 403(b)s, IRAs, and the like — so rarely convert the money they’ve saved into pension-like life annuities that guarantee a monthly check until they die?
What Do People Have Against Retirement Income?
Taking on the strange case of the “annuity puzzle.”
February 25, 2014
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